The good news is you are now aware of the benefits of knowing about forex Order Blocks and why they form. However, for people new to Forex Order Blocks, finding the High Probability Order Block can be a little challenging until you improve your skill with practice.
Order Blocks appear in trending and ranging markets, but how to use them is a little bit different in each market. Also, note that ranging or trending market is always relevant to the timeframe the Order Block is found.
But as a General Rule of Thumb #1, the higher timeframe always has the most influence on which orderblock to choose.
But generally, Order Block Forex usually form after a strong impulse leg up and down.
After the price escapes the order block range with high momentum, the price tends to retrace back into the order block range to pick up market orders.
Price should not remain this tight for an extended time – if it does, then it is just a ranging market or waiting for a long time until enough orders from large institutions are placed before any price movement.
There is no set of rules or way of knowing how long the price will move away from the order block to continue in the original direction.
However, as a General Rule of Thumb #2, If there are orders, you should see price moving away from the order block quite fast or in a short period of time (relevant to the Order Block timeframe).
If you don’t see any reaction in price then it’s most likely that this Order Block Forex is not high probability and it would be better to look for re-evaluating your analysis.
Earlier we indicated order blocks traders in a consolidation range.
Therefore, what you need to keep an eye out for is the area where the price is looking to retrace to (usually between 62% and 79% Fibonacci Levels).
Those consolidation ranges are a classic sign of large Financial Institutions placing their Block of Orders.
The consolidation forms because it is an area where an “Accumulation of Orders” occur in a Bullish Order Block or “Distribution of Orders” in a Bearish Order Block.