In the forex market, the regular forex traders are not the only ones taking part in the trading activities. There are also big banks and big financial institutions that are taking part in the forex trading activities, and they too are trying to make more money out of their investments in the forex market. However, the way they are trading in the forex market is not the same as regular traders. They will often use the order blocks in forex to maximize their profit potential.
Overview about the Order Block in Forex
The order block in forex is the type of collective order placed by big banks and financial institutions in the forex market. Each order block will have its own variables, such as price, quantity, trigger, and so on. There are various types of order blocks available in forex, such as Stop Market, Limit, Iceberg, Market, and Stop Limit order. The banks or financial institutions place the order blocks in the forex market to help them distribute their large orders and maximize their profit potential.
In forex, you are not just dealing with the forex brokers in your trade transactions, but you can also deal with the banks and financial institutions via order blocks. Taking part in the order block transaction means that you are dealing with the institutions that have released the order block in the forex market. For traders, sometimes they can buy or sell the currency pairs at better prices by using order blocks.
The Reasons Banks and Financial Institutions Put Order Blocks in Forex
Banks and financial institutions have the massive funding for their forex investments, so they can’t just buy and sell currency pairs in the forex market in the same way that regular traders will do. To release their massive funds to the forex market, they might use certain methods to give them more efficiency in their forex trading activities. These methods include using the order blocks in the forex market, so they can distribute the big chunks of their orders in the market and increase their profit potential in this way.
So, instead of doing the trades with the manual method, such as by adding the order transactions one by one just like any regular forex traders, big institutions and banks will prefer to use order blocks to make their trading activities simpler and easier to manage. They can put bigger investments in the forex market, and in this way, they can also earn bigger profits from the order blocks they place in the market.
Finding Order Blocks is Not Something You Can Do with Ease
Order blocks from big companies and big banks are not something that you can find every day in the forex market. In fact, it’s not simple to find order blocks in the forex market, and if you don’t have keen eyes, you won’t be able to find them. Order blocks are available in the bullish and bearish order types.
The bullish order block structure appears when the bullish impulsive wave is forming after the break of certain market structure ranges, while the bearish order block structure appears when the bearish impulsive wave is forming after the break of certain price ranges. You can open the buy order when you spot the bullish order block in the market, and you can open the sell order when you spot the bearish order block in the market. Either way, you will trade with the big banks or financial institutions when you are entering their order block in your trades.
How to Take Advantage of Order Blocks in Forex
For some traders, order blocks in the forex market could be something that they don’t want to see. The reason being that some order blocks might affect the price in the market in such a way that many traders don’t want it to happen. Sometimes, long-term forex investors need to deal with their profits getting lowered just because of the order blocks placed by the big banks and financial institutions out of nowhere.
However, despite the disadvantages and risks of order blocks entering the market today, you can still take advantage of the order blocks placed by big banks and financial institutions. Here are some tips to take advantage of order blocks in forex:
- Using order blocks to find out what the big financial institutions are doing in the forex market. You will never know the direction that big banks and financial institutions are going in the forex market unless you read their Commitments of Traders reports. By looking at the order blocks they make in the forex market, you will know which currency pairs they support and what they are doing to move their investments in the forex market. You can get the big insights about how to follow through with their forex trading strategies in the future.
- Using order blocks as your compass for your next trading step in the forex market. Big banks and financial institutions don’t put their order blocks just to waste their investment funds away. They are putting their order blocks because they hope they will make bigger profits in the forex market that way. So, you can use the order blocks they place in the forex market as your compass for your next trading steps. It will save you a lot of research to find the profitable currency pairs in the forex market.
- Order blocks can also help you get better prices in the market. You can also take part in the trade transactions in the order blocks to get better prices in the market. Whether you are selling or buying the currency pairs, order blocks can help you boost your profits, as you are doing the same thing as the big financial institutions and banks in the forex market.
You can use order blocks as the important indicators in the forex market when looking at certain currency pairs profitability, and you can always take advantage of order blocks whenever you want. Big banks and financial institutions will use order blocks to boost their profit potential, and as a trader, you can also follow through on their investment strategy. Yes, it might affect your existing investment in the forex market in some ways, but it can also help you polish your strategies in the forex market or even piggyback on the trade transactions they are doing in the market.