All you need to know about Order Blocks, CHoCH, and BOS

Greetings dear friends and welcome once again to my blog. As time keeps going, we will keep moving ahead into the different terminologies used in the crypto world or the financial market. You don't need to be scared of these words as I'm here to explain them to your understanding.

Some of you may have heard of these words before whereas others may be new to you but in all, just read through as you will be able to learn something new from what I will be explaining here today.

What is an order block

Order blocks are areas in the market where institutional traders or the big boys take their buy or sell orders. Places where we see a serious move in the market either upward or downward.

Order block is a key terminology used in the crypto world that tells traders about the happening within an area in the chart. When you tell a trader that this area is an order block, he or she will know how to maximize the opportunity and make very good profits in the market.

Identify one on any crypto pair

Identifying and ordering blocks in the market is very simple. As I have said earlier, areas, where the big boys or institutional traders take their position are the places we call the order block.

From the chart above, a pair of HBARUSDT is taken into consideration on a 1H chart. The order block begins from the last candles as seen marked with the rectangle shape. The position always returns to the point where it started.

From the chart, the order block begins from the reversal point towards the downtrend movement and then it goes back up to the same level which didn't break the level it always respects the level. So traders who understand this always know that when the trade reaches that level it must reverse to the opposite direction.

What makes an order block valid?

For an order block to be valid, there must be a break of structure i.e. BOS, a change of character i.e. CHoCH, and a fair value gap. These 3 criteria must be taken into consideration for an order block to be valid or to be called an order block.

In this course today, I will explain the criteria one after another in a more in-depth format so that whenever we see it we can be able to use it to identify the order block on a chart. I hope you find this article useful.

What is the difference between CHOCH and BOS? WithFormple on a chart identify both

BOS which is known as a break of structure is a trend continuation pattern in which the market makes a new higher high in an uptrend and a new lower low in a downtrend.

This means that whenever we see a new higher high in an uptrend, we can say a BOS has occurred in the same way, when you see a new lower low in a downtrend, you will also know that a BOS has occurred.

CHoCH is also known as a change of character. This pattern is known as a price reversal pattern which means that if a particular trend changes then we can say a change of character has occurred in the market.

For example, if the market is moving in a downtrend and suddenly there is a change in the trend to an upward direction then we can say that the market has experienced CHoCH.

Conclusion

An order block is a place where the big boys or the financial institution take their trade in the financial market. These areas are characterized by momentum candlesticks or long candles indicating how they pull the market. Also, for the order block to be valid, it must consist of the BOS, CHoCH, and a fair value gap.

I have been able to explain with examples how these order block works. As seen in the image above, the movement always respects where it started and that is why during the reversal, it always doesn't go beyond the starting point.

Disclaimer: ^{This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your research and consult a financial advisor.}

NB: All images are mine and taken from tradingview.com website