Order Block
In Smart Money Concept (SMC) analysis, an order block is the last opposing candle before a significant impulsive price move, representing the price area where institutional entities placed large directional orders, expected to be revisited as a support or resistance zone.
The order block concept, central to the ICT/SMC methodology, identified the last bearish candle (down candle) before a significant bullish impulse move as a bullish order block, and the last bullish candle (up candle) before a significant bearish impulse move as a bearish order block. The logic was that institutions building large positions could not fill all their orders at a single price tick; the candle just before the move represented the zone where the last portion of their accumulation or distribution occurred.
In practical identification on Nifty and Bank Nifty charts, traders looked for the impulsive move first — a sustained directional sequence of candles covering substantial ground. Then they looked back one candle before the impulse began and designated the body of that candle as the order block zone. A return to this zone was hypothesised to encounter residual buy or sell interest from the institution that originally filled orders there.
The order block differed from a simple support or resistance level in that it had a directional narrative: the institutional entity that filled orders in the block had an incentive to defend that level because their average entry price was there. This conceptualisation resonated with participants because it connected price levels to a plausible mechanism rather than simply observing historical price reactions.
On Bank Nifty intraday charts, order blocks formed during the opening 30 minutes of the session were tracked by SMC practitioners for potential re-test setups later in the day. A Bank Nifty bullish order block formed at 9:30 AM that was retested at 11:00 AM with a rejection and bullish engulfing candle was the archetypal order block entry scenario in this framework.
Criticism of the order block concept focused on its subjectivity: different analysts could identify different candles as the order block for the same move, reducing the replicability of signals. Proponents argued that confluence with other SMC concepts — fair value gaps, liquidity sweeps, and market structure — reduced this ambiguity in practice.