Order Blocks – Explained in 6 Minutes

The secret to day trading is to find out and know where the order blocks are. In this video I will show you exactly where and how to find order blocks. Hint order blocks are easy to find with Bitcoin because all transactions are on the block chain

What Is an order Block?
A block refers to a large order of the same security to be bought or sold by institutional or other large investors. There is no official size designation constituting a block of securities, but a commonly used threshold is more than 10,000 equity shares or a total market value of more than $200,000.1 Securities traded in block trades facilitate trading by institutional investors or other large investors that require such bulk trades to meet their needs.

order block refers to a large volume trade that occurs at once.
Exchanges typically define a block as more than 10,000 shares of stock or a trade that has a notional value in excess of $200,000.
Block trades are sometimes done outside of the open markets to lessen the impact on the security’s price.
In order not to influence market prices, large block orders may be broken up into smaller orders and executed through different brokers to mask the true size.

Understanding order Blocks
Users of block trades include large-scale portfolio managers and individual investors. Asset managers of large mutual funds, retirement funds, hedge funds, banks, and insurance companies take a longer-term view of markets when making investment decisions and take large positions in a stock once the decision is made. Large corporations that engage in a large stock buyback may also use block trading to execute their transactions. This type of market participant manages hundreds of millions to tens of billions of dollars.

Advantages of order Block Trades
Extreme imbalances in the supply and demand for a particular stock result from a large acquisition or liquidation of a stock, which increases price volatility. When a fund manager decides to acquire significant stock or seeks to liquidate substantial stock that is not performing, prudence demands that the transaction be conducted in a way that minimizes the adverse effects on the market price that the overwhelming disparity in supply and demand causes.

Execution costs are also a key concern. Attempting to fill a large buy or sell order by breaking it up into smaller transactions ultimately increases costs and may have the same adverse effect on price volatility.

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About the Author: Rachal Bailey