Trading is a thinking activity. Your ability to look at the markets, and predict market direction is the basis of good trading activity. Mindlessly applying a strategy doesn't work.
Its not the strategy that produces trading results but you ,the trader, This fact is self evident when you consider that two traders, using the exact same strategy in the exact same markets can produce completely different results. This datum is theoretical but upon reflection and consideration appears to be true.
put simply, a good trader is a trader who can predict market moves and set his targets and stoplosses appropriately.
We use to operate on the theory of predictability which stated that any move which can be predicted can be profited from and stated that the goal of the trader was to identify patterns in the market which looked likely to repeat,
Upon testing this is no longer true and only realized a small amount of short term success. instead of making higher quality traders all it did was strip away thinkingness from the activity.
The two key abilities in any and all market analysis done by individuals is the ability to look at the markets and think. when these two abilities are combined they produce a prediction which can be acted upon.
in trading the idea of order blocks is a somewhat flawed concept which works extremely well in some markets at some times and not well at all with other markets at other times.
it is not an order block that causes the markets to move. It is the imbalance in supply and demand. This imbalance is what causes the market to move. It stands to reason that if there was at all times a perfect balance between supply and demand of a currency pair that the currency pair may not move.
That imbalance is created by institutions who seek to overwhelm the markets and push it in a certain direction for their own benefit.
"Order blocks" are supposedly pre-existing zones of order imbalances. When this is true they are we see price have an instant rejection of that particular price point.
This is the case because the instant price touches that price level an instant rejection should occur and that would signify a massive amount of orders being fulfilled and therefore price reacts to those massive amounts of orders being fulfilled by changing the instant they're fulfilled.
As a retail trader when your order is fulfilled the market doesn't change or react. Only an institution can do that.
This here is an example, at this exact moment of time a massive order came in which caused a rapid change in price. It is obvious that the order didn't exist before because of it did when price first touched that price point the reaction would have happened then. Not later on.
This is at 1:30. If there order existed before hand it would have made that reaction 10 minutes earlier when price first interacted with that price point. (It is possible an institution had an order placed for that particular time regardless of price point)
All those little movements up and down you see are times when there were slightly more selling than buying or slightly more buying than selling.
If the trend is downwards that means on average there is more selling going on than there is buying and vice versa.
As a trader what you are seeking is the imbalances, you are trying to predict when and in what direction these imbalances are occurring or will occur and will stop occurring.
If you could fully and accurately predict when these imbalances would start and stop occurring and in what direction you'd have a 100% win rate.
If order blocks exist then when price touches your support and resistance levels then price should instantly react.
There is a difference between an order block and changes in market sentiment. Market sentiment for our purposes could be defined as "how the institutional majority of the market view the price of an asset", They either view it as too low or too high, This view is dependent upon the economic or business related factors.
When we say majority we don't mean the bulk of people, we mean the ones who have the most influence and power in the market.
In the markets there is the general imbalance and momentary imbalances.
what the theory of predictability insinuated was that certain price points potentially mark a shift in the general imbalance of the markets and the basis of these theories was strong order blocks and changes in market sentiment.
It placed emphasis on looking for potential repeated price movements as the source of profits and therefore identifying them became the highest priority. but when these patterns didn't repeat exactly it left us with the problem of profitability.
A better understanding of the markets is necessary to correct this
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