📋 Video Summary

🎯 Overview

This video by Trader Hermes, the fourth lesson in his second-level trading course, dives deep into the concept of Order Blocks. The instructor aims to clarify the often misunderstood and complex topic, providing a practical understanding of how to identify and utilize Order Blocks in trading.

📌 Main Topic

Understanding and identifying the First Type of Order Block.

🔑 Key Points

• 1. What is an Order Block? [0:00]

- An Order Block is essentially the last bearish (downward) candle before a price surge, or the last bullish (upward) candle before a price decline.

- It's a zone where smart money (banks) are likely to have placed significant orders.

• 2. Order Blocks as Areas of Interest [1:42]

- Order Blocks are not direct entry points; they are zones of interest.

- Traders should look for confirmation signals within these zones before entering a trade.

• 3. Bank's Behavior: Buying and Selling [2:02]

- Banks always have both long and short positions open.

- They manipulate the market by selling to buy and buying to sell, creating order blocks.

• 4. Order Block Formation & Liquidity [3:30]

- Order Blocks are often found in liquidity zones, where there are many orders.

- Banks use these zones to close or open positions.

• 5. Identifying Smart Money [6:53]

- Two key signs to look for are:

- The process occurs in a liquidity zone [7:02] - The price and time (speed) of the move.

• 6. Order Block Criteria [7:39]

- Not every bearish candle before a rise is an Order Block.

- It must be in a significant zone (liquidity zone, previous highs/lows) [7:42]

• 7. Order Block Anatomy [8:21]

- Look for a bearish candle followed by multiple candles, then a strong bullish move.

- The instructor emphasizes the importance of the context of the Order Block within the market structure.

• 8. Importance of Bias and Liquidity [11:28]

- Your trading bias (bullish or bearish) is critical when using Order Blocks.

- If bullish, focus on bullish Order Blocks, and vice versa.

• 9. Order Block Entry and Stop Loss [13:37]

- When the price returns to the Order Block, draw your block from the open to the close.

- Set your stop-loss below the Order Block's low.

• 10.Candle Body Size and Order Block Selection [16:04]

- Focus on candles with large bodies compared to their wicks.

- If multiple candles form an Order Block, consider the range of the entire group.

• 11.Order Block and Break of Structure [17:54]

- Order blocks lead to strong price movements (breaks of structure)

- When you get a break of structure, the probability of the order block is higher

• 12.Order Block and Trend [25:35]

- The trend is important, bearish order blocks are not respected as much in a downtrend.

💡 Important Insights

• • Order Block is not a buy/sell signal [1:26]
• • Liquidity is crucial for Order Block creation [7:42]
• • The 50% level of the Order Block is important [14:15]
• • The trend is your friend [25:35]

📖 Notable Examples & Stories

• • The instructor analyzes multiple charts (e.g., US500) to identify valid and invalid Order Blocks, explaining his reasoning [18:57].
• • He explains how to correctly identify an Order Block [20:41].
• • The instructor explains how to use the "fair value gap" in trading [28:28]

🎓 Key Takeaways

• 1. Order Blocks are zones of interest, not immediate entry points.
• 2. Context is crucial; consider the market structure and liquidity.
• 3. Combine Order Blocks with your bias and other confirmations.

✅ Action Items (if applicable)

□ Practice identifying Order Blocks on different charts and timeframes. □ Backtest your analysis and trading strategy.

🔍 Conclusion

The video provides a comprehensive guide to understanding Order Blocks, emphasizing the importance of context, liquidity, and confirmation signals. It encourages viewers to think critically and apply these concepts practically to improve their trading strategies.