Identify the location where Oda-kuchi planted it in the 4th installment. How to distinguish Order Blocks (OB) [SMC Basics ④]

Hello,naohere.

Last time, we explained “Liquidity and Stop Hunt.” The big players cut losses to harvest price levels favorable to them and stack positions at those levels——I think the trend has become visible.

This time is the continuation, a section on “Order Block (Order Block / OB).”

This isSMC’s one of the most important concepts,“the place where the big players actually placed their positions.”.If you can identify this, the accuracy of pullback and retracement entry points will greatly improve.

An Order Block (OB) isthe price range where big players placed large orders.

On the chart, it can be identified as“the candlestick just before a strong move starts”.

In a rising OB case:

→the decline candle just before a large up move (impulse) begins (or a small bearish candle) as a guide

In a falling OB case:

→the rise candle just before a large down move (impulse) begins (or a small bullish candle) as a guide

Why is that moment important——Because the big players will buy (or sell) again when price returns to defend the position they have placed there.

In other wordsit functions as “the place where the big players’ bids remain,” and price often reacts there.That isOB’s essence.

This is the point that beginners in SMC most doubt.

“What makes it different from ordinary support lines?”

The difference lies in the depth of the evidence.

General support and resistance draw horizontal lines where price has reacted multiple times. On the other hand, OB is identified from the basis that “there exists a large order at that place.”OB is determined from this basis.

StrongOB conditions:

・There is a liquidity sweep immediately before

・Displacement occurs together with an impulse

・It is untested (price has not yet returned)

・Can be confirmed on multiple timeframes (upper timeframes OB is stronger)

The more of these conditions are met,the higher the reliability that price will decisively defend that level.

When you find an OB candidate, you must verify whether the price action that started there was truly institutional in nature. This is calledDisplacement.

・Candlestick body is large, wicks are extremely short (a definitive move in one direction)

・Within that move,FVG

・BOS is caused by the strength

Conversely, candles with long wicks in both directions and visible hesitation are not Displacement.Displacement is not the same as a large candle or a single impulsive move by institutions.

OB that forms where there is no Displacement is"that seems like a place"——From 2024 to 2025 in English-speaking SMC communities, this criterion has become standard for selecting OBs.

There are many possible OB locations, but not all work equally well.

【StrongOB】

・Occurred right after a liquidity sweepOB

・BOS (structure destruction) initiated at the move’s starting point

・Upper timeframe confirmation (4H, daily, etc.)OB

・Prices first return to the OB zone (first touch)

・An impulse starting point accompanied by Displacement

【Weak OB /difficult OB】

・Touched multiple times and broken

・No liquidity evidence immediately prior

・Isolated OB visible only on lower timeframes

・Recent impulse was weak (no Displacement)

In my actual trading,I combine “higher-timeframe OB and precise entry on lower timeframe.”On 4H, 1H, and M15 to identify OB, then enter on M15, M5, M1 timingas a usage method.

Additionally, in English-speaking circles there is a usage calledCE (Consequent Encroachment).OB zone center (50% line) reactionis observed; if wicks penetrate up to 50% and the body stays inside the zone, it’s called “alive OB”; if the body closes below 50% it’s seen as “beginning to Collapse OB.”Killzone (London,NY open hours) with this concept will be explained in a future section.

4H and daily aren’t the only timeframes. In practice, I also use M5, M15, and 1H, but higher timeframes tend to be more effective.

Trading with awareness of the price ranges where big players are placing orders existed even before learning SMC. The sense that “it would be interesting if price returns near the candlestick right before a surge or plunge” comes from long chart viewing.

After learning the concept of Order Block in SMC, what changed was——the criteria were verbalized.Where OB is, what are valid conditions, and when would it be invalid. As soon as the name and definition were created, judgments based on intuition alone could be explained by rules.

At the same time, I realized that, “OB does not always guarantee a rebound.” There were many cases where price simply chopped through despite meeting the criteria. The pretty rebounds seen in tutorial videos are the result of countless passes (being steered through).

Then why useOB

The correct use is to apply it as evidence that you can enter with limited risk.OB below it (slightly below the lower boundary if rising OB) is where stop loss can be placed to minimize losses. If a rebound occurs, profits can be large. This is a concept of asymmetric risk-reward.

Now I further refine decisions.Only OB with confirmed Displacement should be considered the primary target.Do not trust OB zones that simply cross the 50% CE line with the body.With these two rules, entry quality improves.

Rather than chasing a perfect OB, a stance of entering small at OBs where conditions are met and riding the move is more sustainable.

①Order Block () is the price range where big players placed large orders. The candlestick area just before a strong impulse move is the guide. The impulse withOBDisplacement (institutional-like abrupt movement) is evidence of OB.

②Strong OB features include “post-liquidity sweep,” “origin of BOS (structure break),” “untested,” “confirmed on higher timeframes,” and “Displacement confirmed.” More conditions increase reliability.

③ OBis a concept used to enter with limited risk. If price crosses the CE 50% line in the body of the OB zone, trust diminishes. Use higher-timeframe OB for direction, and enter more precisely on lower timeframes.

Next time: explain “FVG (Fair Value Gap)— the gaps formed when price moves sharply — and why price returns to those areas. Combined with OB, entry accuracy improves further.

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【Author Profile】

nao｜16 years as FX full-time trader and EA developer

Specializes in GOLD scalping and day trading with SMC/ICT as core concepts.

While trading, faced with the issue of “reading correctly but wobbling due to mentality,”

developed a hybrid tool of discretionary entry × EA automatic management, named “tundere【R】.”

Provides a system to eliminate fear of stop losses and maximize profits during favorable moves for gold traders.

▶ Details of tundere【R】 here

https://www.gogojungle.co.jp/tools/indicators/71019?via=toppage_recentViewed