---
title: 'Order Block Trading Strategy for High-Probability Entries'
source: 'https://youtube.com/watch?v=a5f5capdZ84'
video_id: 'a5f5capdZ84'
date: 2026-08-19
duration_sec: 823
channel: 'Smart Risk'
---

# Order Block Trading Strategy for High-Probability Entries

> Source: [Order Block Trading Strategy for High-Probability Entries](https://youtube.com/watch?v=a5f5capdZ84)

## Summary

This video presents a comprehensive guide to order block trading, based on backtesting over 100 order blocks. It explains what order blocks are, how to identify and mark them, and outlines five advanced concepts that distinguish high-quality setups from low-probability ones, including trend alignment, freshness, market structure, volatility, and lower timeframe confirmation.

### Key Points

- **Backtesting premise** [00:02] — The video is based on backtesting more than 100 order blocks to identify what separates high-quality order blocks from low-quality ones, aiming to improve win rate and reliability.
- **Definition of order blocks** [00:58] — Order blocks are areas on the chart where a large number of buy or sell orders have previously entered the market, possibly due to smart money activity. They are high-quality supply or demand zones, but not every supply/demand zone qualifies.
- **Formation via imbalance** [01:27] — Order blocks form when large candles create an imbalance (also called inefficiency or fair value gap). A strong move in one direction suggests smart money entered, and price often pulls back to fill the imbalance.
- **Marking the order block** [02:21] — Mark the candle before the fair value gap as the order block, as it represents where the buying/selling decision was made. The candle color doesn't matter; it can be green, red, or a doji.
- **Including wicks** [03:17] — If price sweeps liquidity with a wick just before creating the fair value gap, include the wick as part of the order block because it marks the true beginning of the move.
- **Liquidity sweep pro tip** [03:44] — Order blocks that sweep liquidity are higher quality because institutions collect liquidity before entering large positions. Marking liquidity areas (e.g., below equal lows) helps identify these setups.
- **Order block size handling** [04:25] — Small order blocks need extra stop loss space; large order blocks can be entered around the middle for better risk-reward, or use lower timeframe confirmation.
- **Sponsor segment** [05:07] — FundedNext prop firm is promoted, offering futures and CFD accounts, challenge accounts from $5,000 to $200,000, and instant funding options.
- **Backtesting results overview** [05:48] — The backtesting results are summarized into five advanced concepts: market direction, freshness, market structure, volatility/spread, and lower timeframe confirmation.
- **Concept 1: Market direction** [06:01] — Order blocks perform better when aligned with the overall market trend. Determine market direction first and only trade order blocks in line with that trend.
- **Concept 2: Freshness** [06:14] — Freshly formed order blocks consistently outperform older ones. As market sentiment shifts, older order blocks become less reliable, so prefer recently formed zones.
- **Concept 3: Market structure patterns** [07:23] — Three patterns affect order block quality: fair value gap mitigation (avoid first order block if another FVG sits behind), order block at liquidity (avoid if directly on top of obvious liquidity), and liquidity sweep before pullback (increases probability).
- **High-quality blocks can fail** [09:47] — Even high-quality order blocks can fail; a losing trade doesn't mean analysis was incorrect. Best strategies only provide a small edge.
- **Concept 4: Volatility and spread** [10:01] — Most winning trades occur during highly volatile sessions, especially mid-week. Trade low-spread instruments during liquid sessions (London/New York) for better entries.
- **Concept 5: Lower timeframe confirmation** [11:09] — Wait for price to pull back into the order block, then switch to a lower timeframe for rejection signs like market structure shift or lower timeframe order block for precise entry.
- **Timeframe combinations** [12:33] — Best combinations are one or two steps apart, e.g., 4-hour with 5-minute, 1-hour with 5/1-minute, daily with 1-hour/15-minute.
- **Final reminder** [13:03] — No setup works every time; the goal is to have an edge in your favor, not to win every trade.

### Conclusion

The video provides a systematic approach to order block trading, emphasizing quality over quantity. By focusing on trend alignment, freshness, market structure, volatility, and lower timeframe confirmation, traders can significantly improve their win rate and risk-reward ratios.

## Transcript

you're trading every order block you see, you'll probably lose money. So, why do some order blocks work while others get ignored by the market? To answer that question, we back-tested more than 100 order blocks to discover
what separates high-quality order blocks from low-quality ones. We tested actually improve the win rate and reliability of order blocks and gathered valuable findings. In this video, you'll learn what an order block really is, why
it forms, and how to identify and mark it correctly on your charts. We'll also cover the characteristics of a high-quality order block, the common mistakes that cause traders to enter low-probability setups, and the rules
of a successful trade. So, guys, if that's something you're make sure to hit the like button to support our channel and subscribe if you're new. Now, what is an order block?
Order blocks are areas on the chart where a large number of buy or sell orders have previously entered the market, possibly due to smart money activity. So, when price returns to these zones,
creating a high-quality trading opportunity. So, basically, an order block is a high-quality supply or demand zone. However, not every supply or demand zone qualifies as an order block.
Now, I mentioned that order blocks form when large orders enter the market. But how do we know it happened? The answer is simple. We look for large candles that create an imbalance. Imbalance, inefficiency, or fair value
gap are similar terms that describe the same concept. When a large amount of buying or selling pressure enters the market, the price moves aggressively in one direction, creating an imbalance, leaving behind a
fair value gap. This strong move suggests that smart money has entered the market. Price often pulls back to these imbalances to fill the remaining orders, creating potential trading
opportunities. For this reason, a supply or demand zone that creates a fair value gap is generally considered an order block. Whenever we analyze the market, we always mark fair value gaps on the
As they are the first requirement for identifying a high-quality supply and demand. Now, how do we exactly mark the order block zone on the chart? We mark the candle before the fair value
gap as our order block because we believe this is where the buying or selling decisions were made. If the price returns to this area, we expect buyers or sellers to step in again, causing a strong reaction.
In simple terms, order blocks are strong supply and demand zones. The difference is that we only focus on the zones that created a strong move and left behind a fair value gap, suggesting that smart money was active there.
When marking order blocks, the color of the candle doesn't matter. In a bullish setup, the candle can be green, red, or even a doji. As long as it is the candle that created the gap, it can be a valid bullish order
block. Also, here's an important detail. Sometimes, price sweeps liquidity with a wick just before creating the fair value gap. When that happens, we include the wick
as part of the order block because it marks the true beginning of the move. be below that wick to give the trade Now, here's a pro tip to make your order blocks more reliable.
If the order block sweeps liquidity, it can provide a very high-quality setup. Liquidity is where stop losses and pending orders are placed. From basic price action, we know that there are a lot of stop loss are
gathered below these equal lows. So, we mark it as a liquidity area. sweeps liquidity before creating the demand zone, the quality of the demand zone increases because institutions need to collect
liquidity before entering large positions and continuing the trend. Similarly, if price engages liquidity before entering the order block, the probability of working that order block increases
because major market moves often occur after smart money collects liquidity. Order blocks can form at the start of an impulsive move or even in the middle of They can be small or large. If the order block is small, give your
stop loss a little extra space because the price doesn't always reverse exactly from the edge of the zone. If the order block is large, you can either enter around the middle of the zone to get a better risk to reward
ratio or switch to a lower time frame and wait for a confirmation before Now that you know how to identify and mark order blocks, let's look at what makes an order block high quality based on our backtesting results.
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out the link in the description. During our backtesting, we found that the best-performing order blocks shared several common characteristics. The results of our backtesting can be summarized into five advanced concepts.
market direction. Order blocks perform better when they align with the overall market trend. Instead of trading every order block you see, first determine the market direction and only trade order blocks
that are in line with that trend. Our next important finding from the backtesting was that freshly formed order blocks consistently performed better than older ones. As the market moves, market sentiment
Spending too much time waiting for the price to return to an old order block often leads to lower-quality trading opportunities because the market structure has already shifted. For this reason, we always prefer
trading recently formed order blocks over older ones. 1-hour chart. In this downtrend, notice how many times the price has created fresh order blocks, rejected them, and continues
pushing lower. In another example, here we have two One of them has formed and been rejected recently. However, before price returns to the second one, the market structure and sentiment have completely shifted.
So, it is no longer considered a high-quality long-term trading opportunity. Our backtesting showed that older order blocks become much less reliable once the market shifts against them.
The next concept is market structure. Market structure and order blocks are Market structure and order blocks are not two separate concepts. In fact, they Sometimes market structure can make an order block invalid, while other times
it can significantly increase its probability of success. In this part of the video, I'm going to show you three common market structure patterns that can affect the quality of an order block.
Pattern number one, fair value gap mitigation. Here we have a valid order block that created an imbalance. Waiting for a pullback and setting up a long trade at this zone looks like a promising opportunity.
However, if you look at the left-hand side of the chart, you'll notice another fair value gap and order block sitting just below the first one we marked. In situations like this, it is very common for the price to make a deeper
retracement into the second zone, filling the fair value gap before continuing higher. During this move, the first order block often acts as a liquidity target rather than the actual reversal point.
As a result, entering a trade at the first order block carries a higher risk of being stopped out before the market moves in the expected direction. This is why we generally avoid trading the first order block whenever another
fresh fair value gap and order block are located directly behind it. Number two, order block at liquidity. Sometimes an order block forms directly on top of a major liquidity level.
Although the order block itself is valid, this setup is generally not of high quality. The reason is simple. Before the market can continue in the intended direction, it often sweeps up nearby liquidity.
If the liquidity sits underneath the order block, it could cause a failed For this reason, we generally avoid trading order blocks that are positioned directly on top of obvious liquidity pools.
Pattern number three, liquidity sweep before the pullback. The third pattern occurs when the market sweeps liquidity before re-tracing into an order block. Once liquidity has been taken and the
price rejects the order block, it continues higher. This sequence significantly increases the probability of the order block been taken out, the price moves to engage buy-side liquidity.
But, here is an important point. Even high-quality order blocks can fail. A losing trade does not necessarily mean your analysis was incorrect. Even the best strategies in the world only provide a small edge over the market.
Now, let's move on to the next concept which can help improve your win rate. Market volatility and spread. When we analyzed our backtesting results, we noticed that most winning trades occurred during highly volatile
trading sessions. The market typically experiences lower liquidity at the beginning and end of the trading week, especially on Mondays As a result, many of the highest probability setups tend to occur during
the middle of the week when trading volume and volatility are higher. In addition, currency pairs such as euro-dollar are generally best traded during the London and New York sessions when market activity is at its highest.
Trading outside of these sessions often provides fewer opportunities because the price lacks the momentum needed to produce meaningful market moves. order blocks is understanding how to deal with the spread.
In many cases, price reacts to an order block within just a few pips. If you're trading a pair with a wide spread, you may miss profitable entries because the price didn't trigger your setup even though it touched your zone.
For this reason, it is generally better to trade low spread instruments during highly liquid market sessions. The final concept that can significantly improve the quality of your trades is lower time frame confirmation.
order block and waiting for the price to trigger your trade, wait for the price to pull back into the zone, then switch to a lower time frame and look for signs of rejection. This simple act can help you avoid many
with confidence. Here on the lower time frame, we can study the price action more closely. At this stage, we are looking for reject the zone. One of the strongest confirmations is a
market structure shift where the price breaks through a protected high. This shows that momentum is beginning to shift in the direction of the trade. For the entry, you can wait for a lower time frame order block to form.
This provides a much more precise entry with a smaller stop loss and bigger This not only increases the probability of the setup, but also improves the risk to reward ratio. You can also look for signs such as
sweeps, or a fair value gap forming as a reaction to an order block. additional reasons for the higher time frame order block to work.
The best time frame combinations are usually one or two steps apart. For example, if your higher time frame order block is on the 4-hour chart, look 5-minute chart. If you identify an order block on the
1-hour chart, confirmations on the 5-minute or 1-minute chart often work Likewise, if you trade from the daily chart, the 1-hour or 15-minute chart can provide excellent confirmation. One important point to remember is that
no trading setup works every time. The goal is not to win every trade, but your favor. If you found this video helpful, make the channel. It really helps us create more free
educational content like this. Also, let me know in the comments which useful, or if you've discovered any techniques that improved your own order block trading, I'd love to hear your thoughts.
Finally, if you're interested in learning more advanced price action and smart money strategies, be sure to check out the other videos on our channel. out the other videos on our channel. I'll see you in the next video.