BEST Order Block Indicator on TradingView
https://www.youtube.com/watch?v=fM-tgGv58Jk
Transcript:
Order blocks are one of the most popular concepts in trading, but with hundreds of methods and videos on this concept, it’s nearly impossible to know exactly how to draw or use them effectively until now. We went ahead and dug through thousands of order block concepts and teachings to develop one of the most comprehensive methods of detecting and displaying order blocks ever seen on the platform.
And while doing so, we found some very interesting observations you’re going to want to know about. So, with the help of some of the best programmers on the platform, we set out to develop and integrate what we learned directly into our price action concepts indicator. And in this video, we’re going to show you exactly how order blocks work, the best way to implement them in your trading, and in the end, share a secret that 80% of users are unaware of when using order blocks.
Order blocks refers to areas in the market where significant buying and selling activity accumulates before a large move. These areas are theorized to be used for liquidity by large institutions, so when the price returns to these levels, typically, there will be a strong reaction. Now, whether the theory is true or not, we needed to figure out exactly how to identify these areas.
We wanted to make sure they had practical use cases, and after careful observation, we started to notice something. Across all methods of detecting order blocks, one single thing remained consistent. As the price moves away from an order block, this causes a shift in market structure, creating a change of character or a break of structure.
So in our indicator, bullish order blocks are positioned at the low of bullish structures, and bearish order blocks are positioned at the high of bearish structures. But there’s one problem. When order blocks are detected and price returns to those areas, we noticed that a lot of them are completely ignored.
So knowing where order blocks were located wasn’t enough. We needed to go deeper. That’s when we decided to take the volume data and plot it on the order block, but we didn’t stop there. We then separated that data into buying and selling activity, where the green bar shows the total buying volume and the red bar shows the total selling volume.
So as the price returns to these areas, you can see if there is more buying or selling happening at that level. It also provides a percentage to show how significant an order block may be based on the total trading activity allowing you to identify potentially weak and strong order blocks. But that wasn’t enough.
When an order block is mitigated, this leaves behind what’s called a breaker block. Buyers or sellers are theorized to now be trapped at these levels. And if price returns to this area, those traders will start to close their positions this activity may cause price to move further in the direction of the break with this understanding we went ahead and integrated what we call volumetric order blocks this allows users to not only automatically detect order blocks on the chart but also get valuable information about those blocks to make more informed trading decisions.
We even include tons of customization methods, allowing flexibility on how users may want to use these features to tackle the constantly changing landscape that is the market. Now that you made it this far, let’s dive into some examples. Then we’re going to reveal an insight that 80% of users are unaware of when trading with these order blocks.
First, go to the settings of the Price Action Concepts indicator, and you’ll see Volumetric Order Blocks. We want to ensure we have the Show Last option enabled. This will allow order blocks to be displayed on the chart, and you can increase this number to see more order blocks or reduce it to see fewer.
Then, make sure Internal Buy and Sell Activity is enabled along with Show Metrics to see fewer. Then make sure internal buy and sell activity is enabled along with show metrics to see the data for each order block. Now let’s say you just had a bullish change of character and you’re looking to take a buy.
But buying here is a mistake since you might be buying at the high of the market. So let’s wait for a retracement. The indicator has already automatically plotted an order block for you below this change of character. And if we look at that order block, we see that there’s more sellers than buyers in that area, yet the price went higher.
This could be an indication that the sellers are exhausted at these levels, and a return to this area could be a pull on liquidity to go higher. In this other example, we see that a bearish market structure was created with more selling activity, which could mean that price has a strong probability of continuing to trend without an immediate retracement to the order block area.
But if the price does return to that order block and it’s mitigated, we can go back to settings and enable breaker blocks. This will plot the level where the order block was mitigated, and as the price returns to this level, we can use it as a break and retest to seek longs as a potential reversal setup.
We also included a timeframe feature allowing users to see order blocks from any higher or lower timeframe. Here we can see we’re on a 30 minute chart, but I can use the timeframe option to display order blocks detected on a 4 hour timeframe, potentially identifying more significant areas on the chart. These are just some of the many use cases for these volumetric order blocks.
That being said, here’s a secret that most use cases for these volumetric order blocks. That being said, here’s a secret that most traders aren’t aware of when trading order blocks. When an order block is created, the data shown on the order block is not just for the specific candles it’s drawn from.
It actually extends beyond those candles, providing data for the entire structural shift. Meaning, you’ll get to know the trading activity of that entire block of price action, providing never-before-seen insights for sentiment analysis. The indicator includes other features such as a mitigation method.
This is set to close by default, and an order block will be considered mitigated only when price closes below a bullish order block or above a bearish order block, but you also have the options of wick and average. The hide overlap option is very helpful in situations where there are overlapping order blocks displayed on the chart.
Enabling this option will cause the indicator to only display the most relevant ones. The length option will allow you to change what swing points are used to detect order blocks and by default this is the same as the market structure. We understand the importance of allowing flexibility here, so you can change that and use a different swing point for order blocks without changing your market structure.
That being said, by the time you watch this video, more settings may be added or removed as we’re constantly improving these tools. But you’ll always be able to find out more on those changes at Luxalgo.com by going to Resources, selecting Guides, and choosing Price Action Concepts, or by using the ChatGPT feature and get answers to specific questions.
We hope this video helps you better understand how order blocks are constructed in the toolkit, exactly how they work and can be used in your day-to-day trading.
