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By Admin
Posted on October 16, 2024
Do you want to level up your trading by using ICT breaker block trading strategies? Do you want to learn what a breaker block is and how to trade using it?
There are many trading strategies in technical analysis, one of which is the breaker block. This trading strategy is excellent for predicting the future moves of the market and works well across all assets, whether it is stocks, indices, commodities, forex, or cryptos.
This trading strategy originally comes under the concept of SMC (Smart Money Concepts), which was introduced by ICT (Inner Circle Trader). I have also written an article on SMC, so make sure to read that as well.
To understand breaker blocks, it is important to first understand order blocks because breaker blocks are formed in conjunction with them. I have already written an article on order blocks, so make sure to read it thoroughly and then understand breaker blocks.
In this article, I will explain and teach you how to trade using a breaker block and the role of order blocks in this strategy, along with images to help you understand better.
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A breaker block also known as Break of Structure (BoS) is a failed order block that forms or occurs during a market structure shift. In this, the price does come to the order blocks, but instead of following the order block, it triggers a stop loss, creating a gap and resulting in a stop loss. This is how a breaker block is formed. When the market returns to the zone where a Fair Value Gap (FVG) and a breaker block exist, it often leads to a significant price move.
It is also important to understand that this is a technical analysis-based trading strategy, which is why it can also hit stop losses. No trading strategy is foolproof or 100% accurate.
We can also say that this trading strategy is a trend reversal strategy, meaning the market can shift from bullish to bearish and vice versa.
In the breaker block concept, all liquidity is concentrated because normal traders identify both bullish and bearish order blocks and predict the future movements of the market accordingly. They set their stop losses above or below these levels based on market conditions.
However, institutional traders create such situations and push the market in the opposite direction towards the stop losses, creating liquidity grabs where a breaker block forms. After this, the market begins to move according to that formation. Still, this is a technical analysis-based trading strategy, which is why it is not 100% foolproof.
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To trade in a breaker block, you need to recognize a market structure shift or a change of character; this is the first step for everyone. As I mentioned earlier, a breaker block is a failed order block, meaning it either breaks out in a consolidating market or occurs at a support or resistance level where there is either a high or a low. Understand what I’m saying.
Just as a broken resistance turns into support, a broken order block transforms into a breaker block. This also indicates a market structure shift, so it is essential to understand market structure shifts as well.
Just as there isn’t always an order block at any demand or supply zone, not all breaker blocks are significant. You need to understand that it is crucial to correctly identify the right breaker block.
When a good breaker block forms, there are certain elements that are typically present in the market. It’s important to understand these factors.
There are two types of breaker blocks. Let’s understand each one step by step.
A bullish breaker block is formed when an order block fails, and the candlestick breaks it while simultaneously creating a Fair Value Gap (FVG).
When the price breaks above the high of a failed bearish order block, that high now acts as support instead of resistance. When the price returns to that level, a bullish run is often seen afterward.
To confirm a breaker block, there are several factors to consider. Let’s learn about them.
When the candlestick closes below a bullish order block while forming a Fair Value Gap (FVG), it creates a bearish breaker block.
This is the opposite of a bullish breaker block. In this case, the stop loss of a bullish order block is hit, indicating a change of character and the beginning of a new trend. The same trading strategies that apply to bullish scenarios will also apply here, but in the opposite direction for bearish trades.
A breaker block in ICT trading is when an order block fails, leading to the formation of a breaker block.
ICT is a trading institute similar to any other trading institution, where education related to the stock market is provided, focusing on forex, stocks, commodities, and more. Their primary emphasis is on technical analysis, and they introduced Smart Money Concepts (SMC). The full form of ICT is Inner Circle Trader.
In chart, whenever a price swing or swing low is broken with the creation of a Fair Value Gap (FVG), it is referred to as a breaker.
Order blocks are specific zones from where the price makes a significant movement, while a breaker block occurs when the price returns to an order block but fails to reverse from there, instead breaking the order block and moving in the opposite direction.
