Learn How Smart Money Moves & How You Can Apply Similar Techniques When You Trade
By Money Plant FX
Retail traders are not the only producers in the forex market, in fact, some of the biggest producers are central banks, hedge funds and other major institutions that trade even larger quantities and, therefore, their moves are significantly different from an average retail trader’s.
These players often use what is called an order block, and this is gaining traction with many smart retail traders that want to trade with the smart money. Here at Money Plant FX, we believe that understanding order blocks can help retail traders gain a distinct advantage.
While retail traders might only want to profit from trading, large institutions enter trades for other reasons. Some reasons why a forex order may be used by institutions include:
If institutions were to execute a massive trade at once, they would be destabilizing the market. A large buy or sell order would move the price of the currency pair dramatically, at that point the larger their trade would actually reduce the profitability of their own trades. Institutions therefore take their trades away from the marketplace, and execute their order over a time period. Therefore, they will break down their orders into smaller chunks, known as order blocks, and place them at predetermined times in order to avoid activating the stop losses of traders and to profit from the price (whether higher or lower).
Forex price charts show order blocks as clusters of candles that are clustered around a certain price level. They reflect price levels with high volume trading activity, often showing institutional intent. The price zones created by these orders can serve as:
As a result, this makes them highly relevant for retail traders who want to time their entries and exits better.
Even though order blocks are meant to limit price distortion, they do affect market sentiment and price. Here are a few reasons why every retail trader should note:
1. Smart Money Perspective – Institutional traders have access to privileged market insights and macroeconomic data before it is public. Their order blocks serve as their best estimate at that time for the future of a currency pair. When retail traders can discover order blocks, they can trade with institutional activity.
2. Support/Resistance Framework – Institutional orders come in ranges therefore the upper and lower boundaries of those blocks will also be considered support and resistance zones. Knowing where those zones are can provide clearer trade setups you can follow.
3. Price Volatility and Liquidating Impact – Order blocks have the potential to create volatility because of the size of volume in play. As the market absorbs the order block, temporary supply and demand imbalances are created, and this can cause prices to whip around making it volatile.
At Money Plant FX, we teach our community how to recognize these movements and react appropriately.
Order blocks are sometimes subtle, and not every cluster of candles represents an order block. Here are the steps to identifying an order block:
🔍 Look for Trends in the Market
Look for when order blocks appear after a strong bullish or bearish trend. Order blocks mark the area where institutions are entering or exiting positions.
🔍 Look for Ranging Markets
A market that is in a sideways market and is ranging tightly may indicate that there is accumulation or distribution going on, which is a common signal that there may be an order block.
🔍 Look for Other Tools
Look for volume indicators, support/resistance zones, and candlestick patterns to further validate if the suspected cluster is in fact an order block.
Now that you’ve identified an order block, there are several ways to use it in your trading strategy.
✅ 1. Support & Resistance Trading
✅ 2. Breakout Trading
Order blocks often predate a significant move in price. The opportunity comes from waiting until price has broken out of the block, with volume behind it, for confirmation.
✅ 3. Reversal Trading
At times, the order blocks will form at the end of trends. These may align with reversal candlestick patterns (i.e. pin bar or engulfing candle) to facilitate your preparation for a directional change.
Order blocks give retail traders access into how institutional traders operate, which is an extremely rare occurrence. Retail traders cannot beat or outsmart large institutions, but they can trade with them—the more you know about how they trade.
At Money Plant FX, we want to put our traders in the position to realize these opportunities real time. With tools and education on how to trade with smart money, you can position yourself with them instead of against them.