Order Blocks & Fair Value Gaps

These are the footprints institutions leave behind. Once you see them, you can't unsee them.

Order Blocks (OB)

An order block is the last opposing candle before a strong impulsive move. It marks the zone where institutional orders were placed.

Bullish Order Block

• The last bearish (red) candle before a strong move up
• Represents where institutions placed buy orders
• Expect price to return here for a long entry

Bearish Order Block

• The last bullish (green) candle before a strong move down
• Represents where institutions placed sell orders
• Expect price to return here for a short entry

Identifying Quality Order Blocks

Not all OBs are created equal. Look for:

• Strong displacement after the OB (long, full-bodied candles)
• Break of structure following the OB
• Liquidity taken before the OB formed (swept stops)
• Fresh — hasn't been retested yet

How to Trade

1. Mark the OB zone (open to close of the candle, or full range including wicks)
2. Wait for price to pull back into the zone
3. Look for a lower-timeframe entry confirmation
4. Stop loss beyond the OB
5. Target the next liquidity pool or opposing zone

Fair Value Gaps (FVG)

A Fair Value Gap is a three-candle pattern where the middle candle is so impulsive that it creates a gap between the first and third candles' wicks.

Identifying an FVG

• Candle 1: The wick high/low
• Candle 2: Large impulsive move
• Candle 3: The wick doesn't overlap with Candle 1

The gap between Candle 1's high and Candle 3's low (bullish) or Candle 1's low and Candle 3's high (bearish) is the FVG.

Why FVGs Matter

Markets seek efficiency. When price moves too fast, it creates an imbalance. The market naturally wants to fill this gap — delivering price to all levels makes the move "fair."

Trading FVGs

1. Mark the gap zone on your chart
2. Wait for price to retrace into the FVG
3. Look for reaction (rejection candles, BOS on LTF)
4. Enter with stop beyond the FVG
5. Target: continuation of the original impulse

OB + FVG Confluence

The most powerful setups combine both:

• An order block that overlaps with a fair value gap
• This is where institutional interest meets price inefficiency
• These zones have the highest probability of producing a reaction

Key Takeaway

Order blocks show you where smart money placed their orders. FVGs show you where price was delivered too quickly. When they align, you've found your edge.