#cryptotrading
Lets do a little thread on understanding how to identify viable order blocks
For this you will first understand these terms, which I will explain:
- FVG
- Mitigated
- Impulse
(1)
Lets do a little thread on understanding how to identify viable order blocks
For this you will first understand these terms, which I will explain:
- FVG
- Mitigated
- Impulse
(1)
What is an FVG?
An FVG is a fair value gap, otherwise known as liquidity gaps/imbalances.
Simply put, this is a gap in price where wicks dont meet either side of a candle.
If price is moving down when created, this is a bearish FVG, price moving up is a bullish FVG
(2)
An FVG is a fair value gap, otherwise known as liquidity gaps/imbalances.
Simply put, this is a gap in price where wicks dont meet either side of a candle.
If price is moving down when created, this is a bearish FVG, price moving up is a bullish FVG
(2)
What do they mean by mitigated? This has been mitigated and that has been mitigated?
Mitigated - fancy word for filled.
It basically means price has moved through and completely filled mentioned area.
On this chart, we can see bullish FVGs 'mitigated'
(3)
Mitigated - fancy word for filled.
It basically means price has moved through and completely filled mentioned area.
On this chart, we can see bullish FVGs 'mitigated'
(3)
What is an impulse?
An impulse on a chart is a sharp break out of a range. A significant candle or range of candles, as shown on the chart below
(4)
An impulse on a chart is a sharp break out of a range. A significant candle or range of candles, as shown on the chart below
(4)
ORDER BLOCKS (OB)
An order block is very similar to supply & demand for me. An order block in short is considered the last candle before and impulse move the opposite direction as shown on the chart below
Price dumps - Bearish OB
Price pumps - Bullish OB
(5)
An order block is very similar to supply & demand for me. An order block in short is considered the last candle before and impulse move the opposite direction as shown on the chart below
Price dumps - Bearish OB
Price pumps - Bullish OB
(5)
The problem we see here... The apparent Bullish OB never had a string reaction on first move in and then faked out...
This can happen at any point, as it does.
What you need to understand is how to invalidate order blocks
(6)
This can happen at any point, as it does.
What you need to understand is how to invalidate order blocks
(6)
Valid OB rules I have:
- Overall market structure needs to favour the block when created
- The volume should have increased on impulse
- Should not be part of double bottom/top
- should not have fvg next to/close to it in opposite direction
(7)
- Overall market structure needs to favour the block when created
- The volume should have increased on impulse
- Should not be part of double bottom/top
- should not have fvg next to/close to it in opposite direction
(7)
We can see that high wasn't taken on the impulse move, so failed to break structure.
We can also see clear non-mitigated FVG below it.
This OB is invalid, and not worth the risk. You can see the fake out leading longs, before taking stops below very quickly
(8)
We can also see clear non-mitigated FVG below it.
This OB is invalid, and not worth the risk. You can see the fake out leading longs, before taking stops below very quickly
(8)
Conclusion:
Theres many ideas using Order Blocks to trade, they don't work well because you can't differentiate between a valid/invalid OB
double tops/bottoms get swept on return, FVG attract price, lack of volume is manipulation and so on
Hope this helps
(end)
Theres many ideas using Order Blocks to trade, they don't work well because you can't differentiate between a valid/invalid OB
double tops/bottoms get swept on return, FVG attract price, lack of volume is manipulation and so on
Hope this helps
(end)
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