Order Block
A Smart Money Concepts demand or supply zone — the last opposite-direction candle right before a strong impulsive move — expected to act as support or resistance when price returns to it.
An order block is the final candle that moves against the trend immediately before a powerful, one-sided push. A bullish order block (demand) is the last down-candle before a sharp rally; a bearish order block (supply) is the last up-candle before a sharp drop. The candle's range becomes the zone. The idea behind the name is that large institutions accumulate their orders in that last counter-candle before driving price away, leaving resting interest there — so when price later revisits the zone, that interest is expected to defend it: a bullish order block acts as support below price, a bearish one as resistance above.
In practice an order block is identified by a meaningful displacement: the candle only qualifies if the move that follows it is strong (commonly measured against Average True Range or defined by a break of market structure), which separates genuine institutional footprints from ordinary pullback candles. Traders treat a fresh, untested order block as a high-probability area to enter in the direction of the impulse when price returns. The zone is considered "mitigated" once price trades back into it; some require only a tap of the edge, others a fuller fill, and a block that price closes decisively through is treated as broken and dropped.
Order blocks are popular but among the more interpretive tools in technical analysis — the exact candle chosen, the body-versus-wick boundary, and what counts as sufficient displacement all vary between traders, so two analysts can mark different blocks on the same chart. Their reliability rests almost entirely on context: an order block that coincides with a clear break of structure, a higher-timeframe level, or a fair value gap is far more dependable than one marked in isolation, which fails frequently. They are best used as a confluence zone for timing entries within an already-defined trend, not as a standalone reversal signal — and like all such zones, strong trends leave many of them unreturned-to.
This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.