ICT and SMC order blocks
An order block strategy treats the last opposing candle before a strong move as a zone where price may react on its return. Definitions differ between sources, so you must fix which candle, how strong the move away must be and what counts as a valid return before testing. Without that, the strategy cannot be backtested.
What is the idea?
The idea comes from ICT and SMC teaching. Before a strong upward move, the final down candle is thought to mark where large buyers placed orders, so price returning to that candle's range may meet them again. A mirrored version applies to downward moves.
It is the single most hindsight-prone concept in the family. In any chart, every rally has an obvious order block once the rally has happened. The question a strategy has to answer is whether a rule could have identified the block before the outcome was known.
So the work is almost entirely in the definition. Whether the zone is the candle's body or its full range, how strong the following move must be, how long the zone stays valid, and what makes a return valid are all decisions. Each one changes which blocks the rule finds, and so which trades it takes.
The rules, in order
- Detect a strong move: a move of at least a chosen multiple of the average candle range within a chosen number of candles.
- Mark the last opposing candle before that move as the block, using either its body or its full range.
- Keep the zone valid for a set number of candles, and discard it if price closes through it.
- When price returns into the zone, apply the entry rule: a touch, a close inside, or a confirmation candle.
- Place the stop beyond the far side of the zone and the target at a defined multiple of the risk.
- Optionally gate the trade with a slower timeframe, such as only taking blocks in the direction of the higher-timeframe trend.
The settings the rules hide
Every setting below is a choice, and each one changes which trades the strategy takes. They have to be fixed before a test, and the more of them there are, the more room there is to fit the past.
| Setting | What it controls | Note |
|---|---|---|
| Move strength | How big the move away must be | A higher threshold finds fewer, cleaner blocks and fewer trades. |
| Zone definition | Body only, or full range | The full range gives a wider zone and a wider stop. |
| Validity | How long the zone lasts, and what invalidates it | Old zones are weaker candidates, but only a test can say how much. |
| Entry trigger | Touch, close inside, or confirmation | A confirmation candle reduces false entries and gives a worse price. |
| Stop placement | How far beyond the zone | Too close and the spread takes you out. Too far and the risk is large. |
| Higher-timeframe filter | Whether trend context gates the trade | One more setting is one more way to fit the past. |
What AKQX provides for this
AKQX provides an order-block detector among its SMC blocks in the Smart Strategy Builder, with explicit parameters, so the definition has to be written down and the same chart always yields the same blocks.
It can be combined with liquidity levels and sweeps, fair value gaps, structure breaks, and a higher-timeframe confirmation on a slower candle.
AKQX does not ship a ready order-block strategy as a template. You build and test your own interpretation, and AKQX makes no claim that the concept is profitable.
How to backtest it honestly
- Write the definition in numbers first, then apply it to a long history without looking at which blocks 'worked'.
- Make it causal. The rule may only use information available at the moment of the decision, so a block needs the strong move to be complete before it can be marked.
- Count honestly: how many blocks formed, how many were returned to, how many held. A low return rate is itself a finding.
- Subtract fees and slippage. Block entries often sit near a structural level with a tight stop, which is where costs matter most.
- Nudge the strength threshold, the validity window and the stop distance, and check the result degrades gradually.
- Test a period you did not tune on, then paper trade.
The full method is in how to backtest a crypto strategy, and the way results are scored is on the methodology page.
A worked example, with made-up numbers
Illustrative only: a rule defines a strong move as at least 1.5 times the average candle range within 3 candles. A down candle with a range of 99.5 to 100.5 is followed by a rise to 104. The candle's full range becomes the zone, valid for 40 candles. Price returns to 100.8 and closes inside the zone on the next candle, which is the trigger. The stop sits at 99.3 and the target at twice the risk. Across a long history the test counts how many such zones formed and what happened after each.
Where it goes wrong
- Drawing blocks after the move. It guarantees an obvious block every time and tells you nothing.
- Using the next candle to decide the block was valid, which is look-ahead.
- Treating every zone as equally important. A test should say which kinds of blocks, if any, behave differently.
- Adding filters until the curve is smooth. That is overfitting.
Educational only. AKQX is software only. It is not a SEBI-registered Investment Adviser or Research Analyst and gives no investment advice or recommendations. Backtest and paper-trading results are simulated and do not guarantee future results. Crypto products are unregulated and can be highly risky, and there may be no regulatory recourse for any loss.
Questions about order block strategies
What is an order block?
It is commonly defined as the last opposing candle before a strong move, treated as a zone where price may react when it returns. Definitions vary, so a test has to fix its own.
Can order blocks be backtested?
Yes, once every choice in the definition is written as a number so a computer marks the same blocks a person would. The parts that depend on a trader's eye cannot be tested.
Do order blocks work?
That is an empirical question that depends on your exact definition, market and timeframe, and nobody can answer it in general. This page does not claim they do.
Does AKQX have an order block strategy ready to use?
No. AKQX provides the order-block detector as a building block, and you assemble and test your own strategy from it.
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