Order Block
The last opposing candle before a sharp impulsive move — the price zone where large orders were filled before the move began.
Also called: OB · bullish order block · bearish order block · institutional order block
What it means
An order block is the final candle that goes against the direction of a strong move, immediately before that move starts. A bullish order block is the last down-candle before price breaks sharply higher; a bearish order block is the last up-candle before a sharp drop. The reasoning is that an institution accumulating a large position has to absorb the other side of the book to do it, and that absorption leaves a visible candle.
The zone matters more than the candle. Traders mark the high and low of that candle as a band and watch what price does when it returns — a "retest" or "mitigation" of the block. The block is called unmitigated while price has not traded back into it, and mitigated once it has.
Order blocks decay. A zone that has been tapped three times is not the same evidence as a zone that has never been touched, because each tap consumes some of the resting liquidity that made the zone meaningful in the first place.
How OptionLab Pro’s engine uses it
In the live engine
The Smart Money engine scores an Order Block Mitigation at 3 — above a Break of Structure (2) but below a Change of Character (4). Freshness is applied twice over: an age term of max(0.5, 1 − age/lookback), and a touch-count decay of 1.0x on the first touch, 0.80x on the second and 0.60x on the third and beyond. A BOS and an OB mitigation firing together is treated as a Compound Setup and weighted 5, more than either alone.
go/internal/engine/smc/detect.go (smcWeights, obAgeFreshness, obTouchDecay)The common mistake
Where traders get this wrong
Marking every pullback candle as an order block. The qualifier is the impulse that follows: without a displacement move away from the zone there is no evidence anything was absorbed there, and the "block" is just a candle. The second mistake is treating a third retest as equal evidence to the first — our engine explicitly discounts it to 0.60x for exactly this reason.
Go deeper
There is a full lesson on this in the Academy, with an interactive widget and a Hindi translation.
Related terms
Educational and analytical content only. OptionLab Pro is not a SEBI-registered investment adviser or research analyst and does not give buy or sell recommendations. Derivatives trading carries a high risk of loss.