In ICT methodology, a bullish order block is a price range defined by the bear candle with the lowest close before a bullish move off a support level. A bearish order block is the opposite.
This link is to the ICT mentorship video on order blocks:
The official ICT definition in the Mentorship video on orderblocks is:
Bullish Order Block
Definition: The lowest candle or price bar with a down close that has the most range between open and close and is near a support level.
Validation: When the high of the lowest down close candle or price bar is traded through by a later formed candle or price bar.
Example 1:
In this example the order block is the price range create by the last strong bear candle before the up move off of the support level. Generally, you want to focus on the bodies of the candle(s) (i.e. the prices between the open and close of the candle) and ignore the wicks, but it’s not hard and fast rule. The top of the order block is the open of the red bear candle and the bottom of the order block is the close of the bear candle.
Entry: The standard practice is to enter on a limit order when the price pulls back to the top of the order block. The order block should act as a support level, so your stop can go just under the order block. However, the best order blocks should prevent prices from dropping more than halfway through the order block, so you can use a tighter stop just under the middle of the order block. Alternatively, you can move your stop to the midpoint after price moves strongly away from the order block.
Exit: Frequently, the trade will be to enter at the top of the order block and take at least partial profits when the price moves back up the swing high created before the pullback to the order block.
Example 2:
In this example, the order block (green box) was created by the open and close of the bear candle with the lowest close before the bull move. After the high of that bear candle was violated, a trader could look to enter near the top of the order block.
Tip: In general, you want to see a strong move above the bullish order block of about 2x the range of the order block. A strong move like that should give you more confidence to buy a retracement to the order block and an expectation of a rally off the order block. It’s also likely to create a favorable risk/reward trade.
Tip: A helpful and objective trade filter is to look for setups where you have confluence of an order block at an OTE (optimal price level).
This video shows an example of an OTE and order block confluence:
Risk Disclaimer: Trading in the financial markets involves risks, and it’s important to conduct thorough research, seek professional advice, have a trading plan, and trade responsibly. The information provided in this article is for educational purposes only and should not be considered as financial advice. Remember to assess your risk tolerance and only trade with funds in your trading account you can afford to lose.