Introduction
Have you ever wondered how institutional traders seem to predict market moves with uncanny accuracy? The secret lies in smart money concepts like Order Block, Fair Value Gaps (FVGs), and Mitigation. These advanced price action strategies provide traders with high-probability trade setups by tracking institutional footprints in the market.
In this blog, we’ll break down these powerful concepts into simple, actionable steps, helping you trade smarter and improve your market edge.
What Are Order Blocks?
Definition
An Order Block (OB) is a price zone where big institutions and smart money place large buy or sell orders. These areas often act as support or resistance zones, influencing future price movements.
Types of Order Blocks
- Bullish Order Block – A large down candle before a strong bullish rally, signifying institutional accumulation.
- Bearish Order Block – A large up candle before a sharp bearish move, signaling smart money distribution.
How to Identify Order Blocks
✅ Look for a strong impulse move preceded by consolidation.
✅ Identify the last bearish candle before a rally (bullish OB) or the last bullish candle before a drop (bearish OB).
✅ These areas often coincide with liquidity pools and institutional levels.
How to Trade Order Blocks
🎯 Step 1: Wait for price to return to the order block zone.
🎯 Step 2: Confirm entry with market structure shifts, FVGs, or liquidity sweeps.
🎯 Step 3: Set a stop loss below (for buys) or above (for sells) the order block.
🎯 Step 4: Target previous highs/lows or liquidity zones.
Understanding Fair Value Gaps (FVGs)
Definition
A Fair Value Gap (FVG) occurs when the market moves aggressively in one direction, leaving a visible gap between candles. This represents an area where price is likely to return due to inefficiencies.
How to Identify an FVG
🔍 Look for three consecutive candles where the middle candle’s high and low do not overlap with the previous and next candles.
🔍 These gaps usually occur after strong institutional moves.
How to Trade FVGs
💡 Price tends to return to fill FVGs before continuing in the dominant trend.
💡 Use them as areas of confluence with order blocks or liquidity zones.
💡 Combine with mitigation techniques for high-probability trades.
What is Mitigation in Trading?
Definition
Mitigation occurs when institutions revisit key price levels (such as order blocks) to fill unexecuted orders before continuing their intended trend.
Why Does Mitigation Happen?
- Institutions often spread their orders over time, leading them to revisit previous price zones.
- They trap retail traders by making price appear to reverse before continuing its true direction.
- Mitigation helps balance order flow and reduce drawdown.
How to Identify Mitigation Points
📌 Watch for price retracing into an order block before resuming its trend.
📌 Observe how price reacts to an FVG as confirmation.
📌 Look for liquidity sweeps that fake out retail traders before the actual move.
Trading Mitigation Strategies
✅ Wait for price to revisit the order block before entering trades.
✅ Use FVGs as confluence—if price mitigates an OB and aligns with an FVG, it strengthens the trade setup.
✅ Look for liquidity grabs—a quick sweep of liquidity before mitigation increases trade probability.
Combining Order Blocks, FVGs, and Mitigation for a Powerful Trading Strategy
To maximize profitability, use these three concepts together:
1️⃣ Identify an Order Block – Find a bullish or bearish OB.
2️⃣ Look for an FVG – Check if a fair value gap exists near the OB.
3️⃣ Wait for Mitigation – Allow price to retest and confirm the OB/FVG before entering.
4️⃣ Watch for Liquidity Sweeps – If price grabs liquidity before OB mitigation, it adds confluence.
5️⃣ Enter the Trade – Once price confirms mitigation and reacts to the OB/FVG, enter with a stop loss beyond the OB.
6️⃣ Set Profit Targets – Aim for previous highs/lows or liquidity zones.
Conclusion
🔹 Order Blocks, Fair Value Gaps, and Mitigation are essential tools for understanding institutional trading behavior.
🔹 Mastering these concepts allows traders to develop high-probability trade setups and align with smart money movements.
🔹 Incorporate these techniques into your trading strategy, backtest them, and refine your execution.
🚀 Ready to Trade Like Smart Money?
Start applying these concepts today and refine your strategy to trade like the pros!
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