Order Blocks & Fair Value Gaps
Order blocks and FVGs are zones where institutional traders place orders. Understanding them helps you find entries where smart money is likely to defend their positions.
What Is an Order Block?
An order block is the last candle before a strong move. It represents where institutional orders were placed.
- Bullish OB: Last bearish candle before a strong up move
- Bearish OB: Last bullish candle before a strong down move
When price returns to an order block, it often reacts because institutions defend their positions.
What Is a Fair Value Gap (FVG)?
An FVG is an imbalance created when price moves too fast, leaving a gap between candle wicks.
- Bullish FVG: Gap below in an up move (wick of candle 1 doesn't touch wick of candle 3)
- Bearish FVG: Gap above in a down move
Price often returns to fill these gaps before continuing the trend.
How to Trade Them
Step 1Identify trend direction on higher TF
Step 2Find OB or FVG in direction of trend
Step 3Wait for price to return to zone
Step 4Enter on reaction/confirmation
Important Notes
- Not all OBs/FVGs work. Only trade those in direction of higher TF structure.
- Context matters. OB after liquidity sweep is stronger than random OB.
- Mitigation: Once price touches OB/FVG, it's often "used up" (mitigated).
- Fresh zones: Untested OBs/FVGs are stronger than retested ones.