Basics of Order Block Strategy: A Guide to Using It in Cryptocurrency Trading

Understanding the Essence of Order Blocks

Order blocks are tools that visualize turning points where supply and demand balance shifts rapidly. For traders, accurately reading these patterns provides two key advantages:

• Identifying optimal entry points for reversal trades
• Recognizing psychological resistance and support levels before significant price movements

In simple terms, order blocks are crucial zones for constructing effective positions in both reversal (counter-trend) and continuation (trend-following) trades.

Definition of OB: The last candlestick pattern near support/resistance levels formed just before the price moves rapidly. The concept itself is simple, but it holds extremely important significance in reading market psychology.

Bullish and Bearish: Two Types of Order Block Patterns

Order blocks fundamentally come in two different forms.

Bullish Order Block (BuOB)

• A weak bearish candlestick formed just before an upward surge in an uptrend
• Confirmed near support levels
• Followed by a strong bullish candle that acts as an engulfing candle, forming a buy signal

Bearish Order Block (BeOB)

• A strong bullish candlestick appearing just before a sharp decline in a downtrend
• Formed near resistance levels
• Followed by a strong bearish candle that engulfs the previous candle, generating a sell signal

Practical Trading Methods

Using Bullish OB in Uptrend

Identify a weak bearish candlestick formed just before a strong upward move. If a bullish engulfing candle follows at this stage, proceed as follows:

• Entry: Enter a buy position when reaching the OB level
• Take profit: Set based on the most recent high
• Stop loss: Place below the OB’s low

Using Bearish OB in Downtrend

Capture a strong bullish candlestick pattern just before a rapid decline. When a bearish engulfing candle forms afterward, respond as follows:

• Entry: Short at the OB level re-test
• Take profit: Target the most recent low
• Stop loss: Place above the OB’s high

Timing the Order Block Trades

To effectively utilize OBs, it’s not enough to recognize patterns alone; understanding the overall market structure is essential.

Determining trend direction requires knowledge of Dow Theory and market structure analysis. By integrating these theoretical frameworks with order block analysis, traders can avoid false signals and make more accurate trading decisions.

Practical Summary

• Order blocks are powerful signals indicating rapid shifts in supply and demand
• The basic strategy is to buy at bullish OBs in uptrends and sell at bearish OBs in downtrends
• Combining this approach with market structure and trend analysis significantly improves accuracy
• This method directly enhances technical analysis skills

This guide provides reference information for trading strategies and materials to learn how to trade in the cryptocurrency market. Always make investment decisions responsibly and practice thorough risk management.