Summary of "ORDER BLOCK,FVG & ORDER FLOW In SMC | HINDI | BANKNIFTY| LECTURE~4"

Summary of "ORDER BLOCK, FVG & Order Flow In SMC | HINDI | BANKNIFTY | LECTURE~4"

This lecture by Gwaire focuses on advanced Smart Money Concepts (SMC) trading strategies, specifically around Fair Value Gaps (FVG or FG), Order Blocks, and Order Flow, with practical applications on Bank Nifty charts. The session builds upon prior knowledge of structure mapping and Internal Demand and Supply (IDM), emphasizing that mastering foundational concepts is critical before progressing.

Key Financial Strategies and Concepts Covered

1. Fair Value Gap (FVG) / Fair Price Gap (FG)

Definition: A gap formed within price action, typically during "unhealthy" price movements characterized by large, fast candles causing imbalances.
Identification Method:
- In an uptrend, take the high of the first candle, skip the second candle, and take the low of the third candle.
- The gap between these points forms the FG.
- Inside bars and overlapping candles are treated as single candles for FG calculation.
Significance: FGs indicate areas where large orders have entered the market, often leading to price revisiting these gaps for liquidity and order fulfillment.
Power of FG: Size does not always determine strength; both large and small FGs can trigger significant price moves.
Trend Context: FGs are only valid when aligned with confirmed structure (higher highs/lows in uptrend, lower highs/lows in downtrend) and IDM.

2. Order Blocks

Definition: Candles or clusters where large institutional orders are placed, typically the last selling candle before a bullish move or the last buying candle before a bearish move.
Rules for Marking Order Blocks:
- Color of the candle (red or green) does not matter.
- Must contain a Fair Value Gap above (in uptrend) or below (in downtrend).
- The last selling candle in an uptrend or last buying candle in a downtrend is considered the order block.
- If no FG is present, the order block may shift to the next candle.
Inside Bar Considerations: Inside bar candles are combined and treated as one for order block and FG identification.
Multiple Order Blocks: Several Order Blocks can exist within one swing; the price may respect one or more depending on IDM and FG confirmation.
Order Block Validity: If the FG within the order block is "mitigated" (price fully fills the gap), the order block loses validity.
Relationship with IDM: Order Blocks are identified within confirmed IDM zones, often between IDM and higher low (uptrend) or IDM and lower high (downtrend).

3. Order Flow

Concept: The sequence of pullbacks and price taps within a trend, particularly last selling pullbacks in uptrends and last buying pullbacks in downtrends.
Identification:
- Pullbacks are marked as Order Flow zones.
- The first pullback after IDM is critical.
- Price tapping the Order Flow zone signals continuation of the trend.
Rules:
- Only last selling pullbacks in an uptrend and last buying pullbacks in a downtrend are valid for Order Flow.
- Order Flow zones combined with Order Blocks and FGs increase the probability of successful trades.
Application: Helps in timing entries by identifying zones where price is likely to reverse or continue.

4. Refining Order Blocks

Problem: Large time frame Order Blocks often have large stop losses (e.g., 135-200 points on Bank Nifty), which is not ideal for risk management.
Solution: Refine Order Blocks by zooming into lower time frames (e.g., from 30 minutes to 15 minutes, then 5 minutes) within the same order block range.
Benefit: Smaller refined Order Blocks reduce stop loss size (e.g., from 135 points to 25-30 points), improving risk-reward ratio.
Method:
- Mark the large order block on a higher timeframe.
- Drill down to lower timeframes within that range.
- Identify smaller Order Blocks with corresponding FG.
- Use these refined blocks for precise entries and tighter stops.
Additional Rule: If a candle within the order block is "weak" (small body or wick), only the wick or part of the candle may be considered for the order block rather than the entire candle.