Financial markets have changed a lot in the last few decades, but many traders are engaged in buying and selling. Retail traders are mostly involved in predicting market price trends and digital assets. But these people don’t know that central banks and institutions can easily manipulate the markets. By observing such a situation in the financial markets, retail traders were able to solve this problem through order blocks or order blocks using trading platforms and tools. You may have this question, what is Forex block order and what is its application in financial markets. People can easily buy and sell in global markets by using order blocks and no longer fall into the trap of changes by banks and companies. In the following article , we will introduce you more to the concept of block order .
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What is block order?
In our markets such as forex, companies and central banks accumulate large amounts of their own assets in an order block. These blocks are the supply and demand areas that can be easily identified through the supply and demand price action. In these areas, traders buy and sell assets in a safe area, but banks and financial institutions cannot place large buy and sell orders. Because by providing order blocks from banks and institutions, it will cause a lot of fluctuations in the market. But since most banks intend to buy and sell valuable assets, they are forced to create such custom blocks. The reason for this compulsion is that most of the goods needed by ordinary people are produced by these organizations and companies.
The orders of banks and companies are in the form of block orders, which exit the market after completing their purchase and sale. This cycle continues until their buying and selling ends completely. For example, if a bank wants to buy 200 million euros or US dollars, it will do its purchase in several stages to finally reach its goal. On the other hand, in order not to create fluctuations in the market, banks show 1 block on the selling side. But this is while their blocks are 1000 or more. Now that you are familiar with the concept of block order, in the next part, we will also explain to you the block order forex.
Read more: Price Action Smart Money
Forex block order
As we explained in the previous section of the forex block order article, order blocks are a collection of orders. These orders are created by banks, companies or private or public financial institutions. If retail traders use Level 2 Market Data Trading, they can easily identify these block orders. This method is usually used by large investors, central banks or investment firms. High volume purchases are made in this forex block order.
When using market level 1 data, you need to identify these points. Because this method relies on the market structure and personal information of each trader. Use the following methods to identify collection or distribution points. If you want to make more money in the forex market, check out the forex training course.
Bullish Order Blocks
Bullish order blocks are situations where large banks or financial institutions accumulate large amounts of a particular currency. For example, the central bank of Japan plans to lower the value of the Japanese yen against the US dollar. In this case, it enters the forex financial market and starts buying US dollars to reduce the supply of dollars in the forex market. When the supply in the market decreases, the demand increases and the price of the dollar increases.
As you can see in the image above, the market is in a range for a long time. In the meantime, a number of candles with high volume of transactions can be seen in which buyers collect assets. Note that candles that are green indicate high volume of transactions. After the price breaks through the resistance level, the chart trend is likely to be bullish.
Bearish Order Blocks
What are the advantages and disadvantages of order block?
Important points when using Forex block order
Forex orderblock is one of the best trading strategies that helps traders to achieve net profit. Order blocks give traders the ability to understand what financial institutions intend to do in the market. By using this method in your trading strategy, you will better identify their next move. But when you use this method, you should also consider the following 3 points in your transactions.
1. It is not daily
Finding a forex block order in the market is not the same as searching for it or adding it to your trading plan. No one knows when the banks will enter the market and start buying and selling. Also, order blocks are a very rare situation. Hence you cannot add it as a strategy to your trades because it is not known whether it will happen or not. But if you are a person who observes the market daily and is familiar with the Forex block order phenomenon, you will most likely witness it. On the other hand, you can easily add it to your trading system and use it at the right time.
2. The greater the range, the greater the movement
The market moves in such a way that after the accumulation is complete, the market reverses its trend. When this happens, you should pay attention to the fact that the greater the range, the greater the movement. In this case, the trader enters the market when the price breaks above or below the resistance or support level. As we explained above, the big banks are interested in increasing their buying time. Because for them, the shopping category becomes easier and more economical. Therefore, they make their purchases without facing high fluctuations and away from volatile markets.
3. Combination of volume indicators
In short, using Forex Block Order is a great way to understand the main drivers of market movements. The forex market is heavily influenced by central banks, which often step in to control the value of their currencies. But even though this is an effective technique for capturing real-time market information, there is no definitive opinion on how to implement order blocks in a trading system. Ideally, the best solution is to keep this trading technique and use it naturally whenever you identify areas of accumulation or distribution that occur due to the activity of central banks and large institutions in the markets. Then, most traders enter a position when the price breaks below or above the support and resistance levels, gaining momentum from significant central bank or investment bank buying.