Discussing the article: "Automating Trading Strategies in MQL5 (Part 6): Mastering Order Block Detection for Smart Money Trading"
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Check out the new article: Automating Trading Strategies in MQL5 (Part 6): Mastering Order Block Detection for Smart Money Trading.
In this article, we automate order block detection in MQL5 using pure price action analysis. We define order blocks, implement their detection, and integrate automated trade execution. Finally, we backtest the strategy to evaluate its performance.
We will begin by identifying consolidation ranges, which occur when the price moves within a confined range without a clear trend direction. To do this, we will scan the market for areas where price action lacks significant breakouts. Once we detect a breakout from this range, we will assess whether an order block can be formed. Our validation process will involve checking the three preceding candles before the breakout. If these candles exhibit impulsive movement, we will classify the order block as either bullish or bearish based on the breakout direction. A bullish order block will be identified when the breakout is to the upside, while a bearish order block will be marked when the breakout is to the downside. Once validated, we will plot the order block on the chart for future reference. Here is an example.
If the preceding three candles do not show impulsive movement, we will not validate an order block. Instead, we will only draw the consolidation range, ensuring that we do not mark weak or insignificant zones. After marking the valid order blocks, we will continuously monitor price action. If the price retraces back to a previously validated order block, we will execute trades in alignment with the initial breakout direction, expecting the trend to continue. However, if an order block extends beyond the last significant price point, we will remove it from our valid order block array, ensuring that we only trade relevant and fresh zones. This structured approach will help us focus on high-probability setups, filtering out weak breakouts and ensuring that our trades align with smart money movements.
Author: Allan Munene Mutiiria