Trade Tools - Order Blocks

The Trade Tools - Order Blocks indicator automatically detects and highlights two-candle reversal patterns on your chart to identify potential institutional supply and demand zones.

Usage

The indicator identifies two primary patterns:

• Bullish Order Block: Occurs when a down candle is engulfed by a subsequent up candle. The script draws a green box extending forward from the pattern, highlighting a potential support area.
• Bearish Order Block: Occurs when an up candle is engulfed by a subsequent down candle. The script draws a red box extending forward, highlighting a potential resistance area.

Traders typically use these zones to look for price reactions, entries, or stop-loss placements during trend reversals or pullbacks.

Details

Order blocks represent areas where large market participants may have placed significant orders, leading to strong price reversals. This tool specifically identifies "Engulfing" style order blocks:

• A Bullish Order Block is confirmed when the current candle close is higher than the previous down candle's high.
• A Bearish Order Block is confirmed when the current candle close is lower than the previous up candle's low.

The script uses the box drawing object to project these zones into the future based on the user-defined length.

Settings

• Box Length: Determines how many bars into the future the order block zone will be projected.
• Box Transparency: Adjusts the opacity of the filled color for the detected order block zones.

FAQ

How do I access Trade Tools - Order Blocks?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What defines an "engulfing" order block in this script?

A bullish block is formed when an up candle closes above the high of the preceding down candle. A bearish block is formed when a down candle closes below the low of the preceding up candle.

Can I use this on any timeframe?

Yes, the indicator is designed to work on any timeframe, though the significance of order blocks often increases on higher timeframes like the H1, H4, or Daily charts.