Back testing 07-24-2026
USDCAD Placing order after price reacted to order blocks Daily chart Daily bias-Long Why? Because the previous day candle closed above the previous day's candle.
1 h - Plotting midnight open, if my bias for the day is Long as per ICT. I should place my order below midnight open. We plotted an order block area in the 1h that price might gravitate to and the we wait for a reaction.
we T/P at 2 %
Notice how this candle doesn't almost have a wick
This is one of the biggest concepts in ICT and Smart Money trading. The key is understanding that an order block isn't magical. Price doesn't react because of the candle itself—it reacts because of the large institutional orders that were likely executed there.
Imagine a Bank Wants to Buy 500 Million EUR/USD
Suppose a bank decides to buy €500 million EUR/USD.
They can't simply click "Buy."
Why?
There may only be enough sellers for €50 million at the current price.
If they buy everything immediately:
They push the price much higher.
They get a much worse average price.
Instead, they buy gradually.
This creates an area where institutions accumulate positions.
That area is what ICT traders call an order block.
Why Does Price Come Back?
Imagine the institution only managed to buy 300 million out of 500 million.
They still have 200 million left to buy.
When price later returns to that area...
they continue buying.
Now many buyers enter at the same time:
institutions finishing orders
algorithms programmed around those levels
ICT traders
other smart-money traders
Demand suddenly increases.
Price rallies.
Why Does Price Respect It So Precisely?
Many traders wonder:
"How does price reverse within a few pips?"
Because large institutions often execute orders algorithmically around specific price ranges rather than at a single exact price. Their systems may repeatedly seek liquidity around those levels, making the area significant if enough buying or selling interest remains.
It's not always perfect, though. Some order blocks fail because:
the institutional orders have already been filled,
market conditions have changed,
stronger opposing order flow appears.
A high-quality ICT order block is usually supported by additional evidence, such as:
A sweep of liquidity before the move.
A clear market structure shift (MSS).
A strong displacement away from the level.
Fair Value Gaps (FVGs) created during the impulsive move.
Alignment with the higher-timeframe bias.
Without those confirmations, it's just another candle.
This is probably the concept that made ICT trading "click" for many traders.
The important thing to understand is that institutions don't necessarily "decide" to hunt your stop-loss specifically. Rather, large participants need liquidity to execute large orders efficiently, and price often moves toward areas where many resting orders exist. The result can look like a deliberate stop hunt, even though multiple market participants and algorithms contribute to the move.
Let's walk through why this happens.
First, what is liquidity?
Liquidity is simply orders waiting to be filled.
For every buyer, there must be a seller.
If someone wants to buy $500 million EUR/USD, someone else has to sell $500 million EUR/USD.
Without enough opposite orders, that trade can't be completed at the desired price.
Above resistance:
Buy stop orders
Short sellers' stop-losses
Below support:
Sell stop orders
Long traders' stop-losses
These clusters create pools of liquidity.
Why does price move into those pools?
Imagine you're buying fruit at a market.
One vendor only has 10 apples.
You need 100 apples.
Instead of buying all 10 and driving up the price, you go where there are many sellers.
Large market participants similarly seek areas where there are enough counterparties to transact.
A Trading Example
Suppose institutions believe EUR/USD should eventually rise.
Current price: 1.1500 Below lies a well-known support: 1.1480 Thousands of retail traders buy there.
Almost all place stop-losses at: 1.1470
Why return to the order block afterward?
Think back to the order block.
It represents an area where significant buying or selling previously occurred.
When price sweeps liquidity and then returns to that order block:
fresh liquidity has become available,
some participants may continue executing orders,
the level may align with algorithmic strategies and technical interest.
That combination can create a strong reaction.
A simplified sequence looks like this:
Institution buys │ ▼ Order Block ▲ Price rallies ▼ Returns ▼ Sweeps liquidity below support ▼ Returns into order block ▲ Strong rally
Why does ICT wait for the sweep?
Without the sweep:
❌ There may not be enough liquidity.
❌ The market may not have confirmed its intent.
❌ Price may continue lower.
With the sweep:
✅ Liquidity has been collected.
✅ Weak positions have been shaken out.
✅ If price then rejects from the order block with a Market Structure Shift (MSS), it provides stronger evidence that buyers have regained control.
Bringing it back to your ICT checklist
This is why, when we've reviewed your trades, I've emphasized not buying just because price reached an order block. A higher-quality setup often looks like this:
Identify the higher-timeframe bias.
Wait for price to reach a significant liquidity area.
Watch for a liquidity sweep.
Look for displacement away from the sweep.
Confirm a clean Market Structure Shift (MSS).
Enter on the return to a valid order block or Fair Value Gap (FVG).
Notice that the order block is the final piece of the puzzle, not the first. Waiting for the sweep and confirmation can help filter out many of the trades that look attractive but don't have strong evidence behind them.
