ICT Order Block Trading – Professional Forex Strateg - [TFlab]

One of the foundational components of the ICT (Inner Circle Trader) trading methodology , widely studied in Forex education, is the Order Block. This refers to a price area where institutional-level orders—also known as smart money positions—are concentrated. These zones often result in sudden price reactions and offer critical opportunities for retail traders to align their trades with the market's dominant forces.
When the market retraces to these areas, it often resumes its original direction, providing strategic entry points for high-probability setups.

What Is an ICT Order Block?
An ICT Order Block represents a region on the price chart where significant buying or selling pressure has occurred, typically from large institutions such as banks or hedge funds. These areas precede strong price movements and are considered footprints of smart money.
Retail traders monitor these zones and anticipate the market's return to them, aiming to enter in the same direction as institutional participants.

Types of ICT Order Blocks
Price action is typically directional—either upward or downward—leading to the classification of order blocks into two primary types:

1. Bullish Order Block (OB+)
2. Bearish Order Block (OB−)

Bullish Order Block (OB+)
A Bullish Order Block is formed when a zone of heavy buying pressure results in a sharp upward movement. It often manifests as the last bearish candle before a significant bullish engulfing candle.
Characteristics:

1. The first candle is bearish.
2. The second candle is a strong bullish engulfing candle.
3. These patterns signal an area of smart money accumulation.

Key Criteria for Identifying:

1. The bullish candle must sweep liquidity below the previous bearish candle.
2. It must close above the high of the bearish candle.
3. There should be a price imbalance visible on lower timeframes.
4. A Market Structure Shift (MSS) on lower timeframes confirms the validity.

Note: Tools like the TFLab Engulfing Pattern Indicator (for MT4 and MT5) can assist in detecting these patterns effectively.

Bearish Order Block (OB−)
A Bearish Order Block forms in areas of strong selling pressure, leading to an abrupt downward move. It usually appears as the last bullish candle before a powerful bearish engulfing candle.
Characteristics:

1. The first candle is bullish.
2. The second is a strong bearish engulfing candle.
3. These blocks indicate zones of institutional distribution.

Key Criteria for Identifying:

1. The bearish candle must sweep liquidity above the prior bullish candle.
2. It should close below the low of the bullish candle.
3. The presence of price imbalance on lower timeframes is essential.
4. A Market Structure Shift (MSS) reinforces confirmation.

How to Trade a Bullish ICT Order Block
To effectively trade a bullish order block, follow this structured approach:

1. Identify Market Order Flow: Confirm a prevailing uptrend.
2. Locate a Valid Bullish OB: Use price action to identify potential bullish OBs.
3. Wait for Price Return: Do not enter until the price revisits the order block.
4. Entry Strategy: Execute a buy order near the 50% retracement level of the block.
5. Confirmation: Use lower timeframes (e.g., M15 or M5) to confirm with market structure shifts.

How to Trade a Bearish ICT Order Block
For bearish setups, apply the reverse logic:

1. Identify Market Order Flow: Confirm a downtrend in the market.
2. Locate a Valid Bearish OB: Find areas of smart money selling activity.
3. Wait for Retest: Monitor for a price return to the bearish order block.
4. Entry Strategy: Open a sell position at the 50% retracement of the block.
5. Confirmation: Validate with lower-timeframe MSS for optimal timing.

Risk Management: Stop Loss & Take Profit
When trading order blocks, proper risk control is crucial:

1. Stop Loss: Place a stop a few pips beyond the order block’s boundary.
2. Take Profit: Aim for the next significant liquidity level or market imbalance.
3. Risk Exposure: Limit risk to 1% or less of your total account balance per trade.

Additional Notes on Order Block Trading

1. Order blocks can also emerge after pullbacks within existing trends.
2. These continuation setups provide strong confirmation of the trend’s momentum.

In a Downtrend:

1. A Bearish Order Block may form after a minor bullish correction, indicating continued selling pressure.

In an Uptrend:

1. A Bullish Order Block may form after a bearish retracement, offering a renewed buying opportunity.

Conclusion
By incorporating ICT Order Block analysis into your trading strategy, you can enhance your ability to track smart money movements, improve timing, and elevate the precision of your trade entries and exits.
Advanced indicators like the Breaker Blocks + Order Blocks tool on TradingView can further streamline this process by automatically highlighting potential zones of institutional activity.

TFlab I'm a Big Fan Of Your Work In my Opinion Learning Smart Money Concept is a good trading Strategies That Aspiring traders should learn. Order Blocks Provide tremendous Risk To Rewards Ration 5:1 all the way up 20:1 depending on the Time Frame A Trader decide to use.

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Guys Do you Think Increasing Risk On (Delta=Profits Earned) While Still Maintaining your 0.22%-2% Risk Per Trades Is The Way To Go To Accelerate Profits? Or do you feel this technique is too dangerous. I allow you to review possibilities of website money managements technique links and let you be the Judge.

I)Ryan Jones Fixed Ration Position Sizing Ratio https://whatheheckaboom.wordpress.co...sition-sizing/
Just a note about the fixed ratio position sizing method shared by Ryan Jones in his book The Trading Game. This mainly applies to trading futures. It (can be used for Forex As Well Whatever Your Delta Profit Amount Is Which Can Be $1,000 in Profits) You increase your lot size by A)Standard lots = 1 Lots To 2 Lots or B)Mini Lots = 0.10 Mini to 0.20 Mini Lots or C)0.01 Micro Lots to 0.02 Micro Lots While Still Maintaining Your 0.22%-2% Risk Per Trade. You only become aggressive once you reach your Delta Profit Amount so you can accelerate your return on Capital as quickly and efficient as possible.

Essentially, you add one contract once EACH of the existing contracts have brought in a certain amount of profit. The amount of profit required is called “delta”. This method ignores what the starting capital amount is.

Delta Example = $5,000, you are currently trading 2 contracts, and you have a $40,000 capital base.
To be able to trade 3 contracts, each of the 2 contracts must make $5,000 of profits, for a total of $10,000 profits, before you are allowed to add the 3rd contract to your trading size.
That means you will add your 3rd contract when your capital reaches $50,000.
4th contract will be added when your capital reaches $50,000 + 3*$5,000 = $65,000
5th contract will be added when your capital reaches $65,000 + 4*$5,000 = $85,000
And so on…

However once your capital drops back below $85,000, you need to reduce your contract size back to 4. And when your capital drops below $65,000, you need to reduce your contract size back to 3.
There is a mathematical formula to calculate the number of contracts that you can trade.

If you started off with capital K and traded 1 contract, and let the delta be D. Then
First calculate P = Current capital – K. That is your accumulated profits from your original capital.
Number of contracts to trade N = 0.5 + 0.5 * Sqrt ( 1 + 8 * P / D )
If you started off with capital K and traded X contracts, and delta is D. Then
P = Current capital – K
Number of contracts to trade N = 0.5 + 0.5 * Sqrt ( 4*(X^2) – 4*X + 1 + 8 * P/D )

For those who are curious, the derivation of the formulas above goes like this
Assume original capital = K0, original number of contracts traded = L0
K1 = K0 + L0 * D
K2 = K1 + L1 * D = K0 + D * (L0 + L1)
K3 = K2 + L2 * D = K0 + D * (L0 + L1 + L2)
K3 – K0 = D * (L0 + L1 + L2)
P = D * (L0 + L1 + L2)
P / D = Sum of arithmetic progression starting with L0 = 0.5 * n * ( 2*L0 + (n – 1) ) where
n is the number of terms
L(n) = L(n-1) + 1.
Now re-arrange the terms, solve the quadratic equation, and you will get the formulas above.

II)Fixed Ratio Betting in Trading https://www.daytrading.com/fixed-ratio-betting

Fixed ratio betting is a money management strategy used in trading to determine position sizing. This method tries to grow an account systematically while managing risk. Unlike most other position sizing techniques, Fixed ratio betting adjusts position sizes based on account growth, allowing traders to potentially increase their profits as their account balance grows.
Systematic Growth: Fixed ratio betting increases position sizes as your account grows.
Formula-Driven Use the formula: Units = Square root of (Account Balance / (2 * Delta)) to calculate position sizes.
Delta Choose your delta carefully: It determines how aggressively your position sizes increase. A smaller delta is more aggressive, while a larger delta is more conservative.
Risk Management: The system ties position sizes to account balance, helping prevent overexposure during drawdowns.

Ryan Jones A trader – via his 1999 book “The Trading Game” – is credited with developing and popularizing a specific fixed ratio betting method known as “The 10% Rule.”
This approach involves increasing position size by 10% for every 10% increase in account equity. Jones sought to create a position sizing method that would allow traders to increase their position sizes as their accounts grew, without exposing them to excessive risk.

Advantages of Fixed Ratio Betting

Fixed ratio betting offers several benefits to traders:
01 Systematic Account Growth: Increasing position sizes as the account grows means traders can potentially accelerate their profits without taking on disproportionate risk.
02 Risk Management: The system inherently manages risk by tying position sizes to account balance. This prevents traders from overexposing themselves during drawdowns.
03 Flexibility Traders can adjust the delta to suit their risk tolerance and trading style. Accordingly, the system is adaptable to various markets and strategies.
04 Psychological Benefits: Fixed ratio betting provides a clear, objective framework for position sizing. Like with every aspect of trading, it’s good to have systems in place to reduce emotional decision-making.
05 Tips for Successfully Using Fixed Ratio Betting Start Conservative
06 Begin with a larger delta to limit risk while you become familiar with the system.
07 If your position sizes create any type of emotion – excitement/relief when winning or annoyance/anger when losing – it’s a sign that position sizing needs to decrease.
08 Use Technology Use spreadsheets or calculators to automate calculations and reduce the potential for errors.***
09 Principle – The position size increases in a fixed proportion to the growth of the trading account. For example, a trader might add one contract for every $5,000 increase in account equity.
10 Outcome – This method tries to accelerate growth during winning streaks, as larger positions are taken when the account balance is high. Nonetheless, it can also lead to large drawdowns during losing streaks, as
the position size remains relatively large even as the account balance decreases.
11 Suitability – Fixed ratio betting is generally more suited to aggressive traders who are comfortable with higher risk and volatility in exchange for potentially greater returns. So risk management is, of course,
important.

III)Cross-Platform Expert Advisor: Money Management MT5 Example 11 July 2017 https://www.mql5.com/en/articles/3280 (Fixed Ratio Formula in MT4)

Fixed Ratio Money Management calculates the trade size in proportion to the current balance available on the account. This can be considered a special case of fixed lot money management except that in this type of money management, the lot size is adjusted automatically, rather than manually by the trader. If the account is increasing, the lot size would also increase after every threshold. If the lot size is decreasing, the lot size would also adjust accordingly.

Unlike fixed risk money management, fix ratio does not require a non-zero stop loss. This makes it ideal to use when trades do not require a stop loss, but whose exits are managed in a different manner (closing by profit/loss in the deposit currency, etc.).

The calculation of trade size based on fixed ratio money management is generally expressed in the following formula:

Volume = base_volume + (balance / balance_increase) * volume_increment Where:

Base_Volume – volume to be added to the total volume, regardless of account size
Balance – current balance on the account
Balance_increase – balance increase on the account to trigger an increase in the lot size
Volume_increment – volume to be added/subtracted from the total volume when the balance changes by balance_increase

As an example, suppose we have a base volume of 0.0 lot, and the volume should increase by 0.1 for every $1,000 on the account. The account is currently worth $2,500. The total volume is therefore calculated as follows:

Volume = 0 + (2500 / 1000) * 0.1 = 0.25 lot

This method has many variations. One of these is the method where the lot size is updated only at certain levels (this is the one implemented in fixed ratio money management). For example, in the example mentioned earlier, the calculated volume was 0.25 lot, but in some, it may remain 0.2 lot, and would only increase to 0.3 lot once the balance reaches or exceeds $3,000.
Its UpdateLotSize method can be implemented like the following:
bool CMoneyFixedRatioBase::UpdateLotSize(const string symbol,const double price,const ENUM_ORDER_TYPE type,const double sl=0)
{
m_symbol=m_symbol_man.Get(symbol);
double last_volume=m_volume;
if(CheckPointer(m_symbol))
{
double balance=m_equity==false?m_account.Balance():m_account.Equity();
m_volume=m_volume_base+((int)(balance/m_balance_inc))*m_volume_inc;
m_balance=balance;
}
return last_volume-m_volume!=0;
}

IV)Limitless Opportunities with MT5 — Tester 19 June 2012 https://www.mql5.com/en/articles/392 (MT5 EA Free)

3.1.5. Money Management System

After setting the parameters for all symbols and analyzing the obtained results, you should make settings for the Money Management System.

The Money Management concerns the account as a whole. According to the Fixed Ratio money management method proposed by Ryan Jones, before you can add a lot to an existing number of lots, each of the existing lots shall "win" a certain number of points (which Jones called the "delta"). For example, we have a deposit of 300 dollars and trade with 1 mini lot; the delta of, say, the same 300 dollars would mean that we will increase to 2 mini lots only when we gain (with the 1 mini lot we have) 300 dollars.

Similarly, the lots will be increased to 3 only after 2 mini lots will gain the delta of 300 dollars (each). That is, the increase from 2 to 3 mini lots will be possible when we add to the existing 600 dollars another 2 С… $300 = $600, i.e. when having $1200; from 3 to 4 mini lots with the deposit of $1200 + ($300 С… 3) = $1200 + $900 = $2100, etc. Thus, "the number of contracts is proportional to the amount required to buy a new number of contracts", from where the method derives its name. The decrease in the number of lots follows the same scheme in reverse.

We can, of course, run the parameter optimization but let us better have a look at the manual settings. For a pretest, you can use the Opening prices only mode or OHLC on M1. Got Email But 4100 Payment Is not Reflected in my Bank P1 to

The Money Management System default parameter values are as shown in the table below:
PARAMETERS VALUE
Start Deposit 10000
Delta 300
Start Lot 0.10
Step Lot 0.01

V)Tooraj Amrabadi - Fixed Ratio Lot Calculator Script Is No longer Available on A) www.MQL5.com B)


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VI)Table of Risks Fixed Ratio Spreadsheet

VII)Fixed Ratio vs Linear Money Management

VIII)DDSMM Money Management Works.mp4

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PS I've Enclose DDSMM Excel Spreadsheet I really don't understand what is the delta amount that the DDSMM Excel Spreadsheet is using to increase the lot size. & Other Spreadsheets that Have Fixed Ratio Money Management Techniques

If there are 5 ob with 5 BOS, that respect the rules (5 is maybe not really realistic ) I should take the first ? This question is to unesrstand the importance of the order of OBs. because I saw a lot of OBs (zones that I identify as OB maybe wrong) but a part are higher than the 50 of the fib retracement