The order block is represented by the candle from which the market gets momentum on the bullish/bearish side.
The last candle before the momentum of continuation or reversal for sell/buy.
The last candle before the buying or selling momentum.
For uptrend: Last selling candle (with imbalance) before the buy (rise)
For Downtrend: Last buying candle (with imbalance) before the sell (drop)
Conditions:
1st color of the candle doesn’t matter
2nd Candle must have a proper imbalance
Then only we can assume it is an order block.
OB will work as a level until it is untapped (unmitigated) by the price.
Now we can say that the order block is the last candle with proper imbalance before buying/selling momentum of the market.
We have to mark Order blocks with untapped imbalance.
ORDER FLOW
First, we have to wait for the structure to break, then inducement, we mark order flow, then order block, and imbalance, and then plan our entry.
We must have to focus on structure mapping, order block, imbalance, and order flow then understanding our entry will be very clear and easy.
ORDER FLOW: Last pullback move before the continuation or reversal
Order Flow For Bearish Market: Last buying move before the drop (when the structure is broken)
Order Flow For Bullish Market: Last selling move before the drop (when the structure is broken)
It’s not sure whether the market will tap the order block or not, but most of the time market will tap the order flow before the continuation or the reversals.
Most of the time Order block will exist within the order flow zone. An unmitigated order block within the order flow is very important because it does work.
If an order flow is mitigated, we do not need that because it has a very low probability.
Note: An order Block with a proper imbalance within the untapped order flow is very important because that order block has a high probability to get a response (rejection) from the price.
This is the way to identify the right and valid order block.
If you master identifying the order flow then you will have a high chance to identify the direction of the trend.
Structure > Inducement > valid Order Flow (Major/Minor) > Valid Order Block > Entry
INDUCEMENT
Here we learn how to identify inducement (IND).
Inducement and liquidity is a fuel to create an impulsive move. Without an inducement, there will be no impulsive move.
Inducement is needed to identify the Major structure, whether the market is bullish or bearish, and to plan our entry.
We know that with the help of inducement, we confirm a lower low for a bearish market and a higher high for a bullish market.
For Bearish Market: Inducement is the first internal high taken by the price after BOS.
For Bullish Market: Inducement is the first internal low taken by the price after BOS.
For a bearish market sometimes the market takes inducement and turns downside, sometimes the market takes inducement and goes upside to the extreme unmitigated order flow/order block to full fill the imbalance then it will turn down.
Our major structure will be confirmed by taking an inducement by the price.
NOTE: We have to mark the Inducement level After BOS or CHOCH and An inducement level will always be a part of a major structure.
Case 1) If there is a downtrend and we get BOS, inducement will be an internal High between the Lower High and Lower Low.
Case 2) If there is an uptrend and we get BOS, inducement will be an internal low between the Higher low and Higher High.
Case 3) If there is an Uptrend and we get CHOCH and the market becomes bearish, inducement will be an internal High between Higher High and Lower Low.
Case 4) If there is a downtrend and we get CHOCH and the market becomes bullish, inducement will be an internal low between the Lower Low and higher high.
The market will be bearish If the price breaks the Lower Low or Higher Low: The first internal high taken by the price will be an inducement.
The market will be bullish If the price breaks the Higher High or Lower High: The first internal low taken by the price will be an inducement.
NOTE: Inducement should always be part of the Impulsive move (left leg) not of the corrective move.