An Order Block (OB) is the last down-candle (or cluster of candles) before a bullish impulse, or the last up-candle before a bearish impulse. It marks the price level where institutional smart money placed a large accumulation or distribution order, and the market is expected to return to this zone to pair remaining orders before continuing.
In Smart Money Concepts (SMC) and ICT methodology, order blocks are considered high-confluence entry zones because they represent a footprint of institutional activity. A bullish order block is typically the last red candle before a strong upward move that breaks structure. A bearish order block is the last green candle before a strong downward move.
When price retraces into an order block, traders look for additional confluence: a Fair Value Gap inside the OB zone, a liquidity sweep just below (for bullish OBs), or a market structure shift on a lower timeframe to confirm that institutional buying/selling has resumed.
Tracking order block win rates in your trading journal is crucial. Log the timeframe of the OB (HTF vs LTF), whether a FVG was present inside the zone, and the outcome. Over time this data reveals which OB setups have edge on your specific instrument.