ICT Order Block Entry on EUR/USD
Trade Overview
| Detail | Value |
|---|---|
| Asset | EUR/USD |
| Timeframe | 4H chart (structure), 1H chart (entry) |
| Date Range | August 5 - August 14, 2024 |
| Direction | Short |
| Framework | ICT Smart Money Concepts |
| Risk-to-Reward | 1:2.8 |
| Outcome | Winner - T2 hit, T3 missed by 4 pips |
Context: The Higher Timeframe Narrative
Every ICT trade begins with a higher timeframe narrative. You never trade order blocks in isolation - they must align with the broader directional bias.
Daily Chart Analysis
EUR/USD had been in a downtrend since mid-July 2024, making a sequence of lower highs and lower lows on the daily chart. The pair had fallen from 1.1045 to 1.0880 over three weeks. This told us one thing: the dominant order flow was bearish. Smart money was distributing.
When the daily is bearish, we only look for short setups on lower timeframes. This simple rule eliminates roughly half of all potential trades - and that is the point. Trading with the higher timeframe flow puts the institutional order flow behind your trade.
Weekly Liquidity Context
Looking at the weekly chart, there was a clear pool of sell-side liquidity (equal lows) sitting at 1.0810. This is where retail traders had placed their stop losses. Smart money would likely target this liquidity. Our trade needed to aim in this direction.
Step 1: Identifying the Break of Structure (BOS)
On August 5, EUR/USD broke below the 4H swing low at 1.0905. This was a bearish Break of Structure (BOS). Why does this matter?
A BOS tells us that the sellers have overwhelmed the buyers at a structural level. It is not just a random red candle - it is price breaking below a level that was previously defended. This confirms the bearish bias on the 4H timeframe and sets up the order block trade.
How to Confirm the BOS
Not every break below a level counts. Here is what we checked:
- Was the swing low significant? Yes - it had been tested twice before breaking
- Did the candle close below the level? Yes - the 4H candle closed at 1.0892, well below 1.0905
- Was there displacement? Yes - the move was aggressive, with a wide-body candle indicating institutional participation
Step 2: Locating the Bearish Order Block
Once we confirmed the BOS, we looked back at the price action to find the origin of the move that caused the break. This is where the order block lives.
What is an Order Block?
An order block is the last opposing candle (or cluster of candles) before a strong impulsive move. In a bearish scenario, the order block is the last bullish candle before the aggressive sell-off that broke structure. This candle represents where institutions placed their sell orders.
Identifying Our Order Block
Looking at the 4H chart before the BOS, we identified a bullish candle on August 3 that formed at 1.0935-1.0950. This was the last up-candle before the aggressive sell-off began. The candle had:
- Open: 1.0935
- High: 1.0950
- Close: 1.0948
- Low: 1.0930
The order block zone was defined as the body of this candle: 1.0935 to 1.0948.
Why This Specific Candle?
The logic is simple but powerful. Before smart money can push price aggressively lower, they need to fill their sell orders. They cannot sell all at once without moving the market against themselves. So they allow a small rally (the bullish candle) to attract buyers, then they sell into that buying pressure. The order block marks WHERE they did this.
When price returns to this zone later, the remaining unfilled orders from the same institutions will be waiting. This is why order block retests are high-probability entries.
Step 3: The Retest and Entry
Waiting for the Return
After the BOS on August 5, EUR/USD continued lower to 1.0855 before beginning a retracement. Over August 7-8, price slowly climbed back toward the order block zone.
This is where discipline matters. Many traders would have already shorted during the BOS move. But chasing a move after a BOS is high-risk. The proper ICT approach is to wait for price to retrace to the order block and enter there.
Entry Criteria Checklist
Before entering, we confirmed:
- Price reached the OB zone (1.0935-1.0948) - On August 9, the 4H candle high reached 1.0944, entering our OB zone
- Rejection signal at the OB - The candle showed a long upper wick and closed bearish at 1.0928, indicating sellers were active
- Lower timeframe confirmation - On the 1H chart, we saw a bearish engulfing pattern form at 1.0942
- Time of day - The rejection happened during the London/New York overlap (the kill zone), which is the most active period for EUR/USD
Entry Details
| Parameter | Value |
|---|---|
| Entry Price | 1.0940 |
| Entry Trigger | 1H bearish engulfing at the OB zone during kill zone |
| Entry Date | August 9, 2024, 14:00 UTC |
| Rationale | BOS confirmed bearish bias + retest of OB with rejection + kill zone timing |
Step 4: Risk Management
Stop Loss Placement
| Parameter | Value |
|---|---|
| Stop Loss | 1.0958 |
| Placement Logic | Above the OB high (1.0950) plus 8 pips buffer |
| Risk | 18 pips |
Why above the OB high? If price breaks above the order block, it means the institutional level has been invalidated. Our thesis is wrong, and we need to exit. The 8-pip buffer accounts for spread widening and potential wicks.
Position Sizing
Using a 1% account risk on a $25,000 forex account:
- Risk amount: $250
- Pip value (EUR/USD, 1 standard lot): $10/pip
- Risk in pips: 18
- Position size: $250 / (18 x $10) = 1.39 lots, rounded to 1.3 standard lots
Profit Targets
| Target | Price | Pips | Rationale | R-Multiple |
|---|---|---|---|---|
| T1 | 1.0895 | 45 | Prior 4H swing low | 2.5R |
| T2 | 1.0860 | 80 | Reaction point from prior accumulation | 4.4R |
| T3 | 1.0815 | 125 | Weekly sell-side liquidity pool | 6.9R |
We planned to close 40% at T1, 40% at T2, and hold 20% for T3.
Step 5: Trade Execution and Management
August 9-10: Initial Move
After our entry at 1.0940, price consolidated for several hours around 1.0930. This is normal. The market does not move in a straight line. The important thing was that price did not break back above the OB.
On August 10, selling pressure increased. EUR/USD dropped to 1.0910 during the London session. We moved our stop to 1.0948 (just above the OB body) to reduce risk.
August 11: T1 Approached
Price reached 1.0898 during the New York session - 3 pips from our T1. We closed 40% of the position at 1.0900 (45 pips profit on that portion). Stop moved to 1.0935 (entry area) for the remainder.
August 12-13: Continuation Lower
With sell-side liquidity as our target, we held through minor pullbacks. On August 13, price hit 1.0860 during a news-driven sell-off related to US inflation data. We closed another 40% at T2 (80 pips).
August 14: Final Runner
The remaining 20% was held with a stop at 1.0895 (above T1). Price reached 1.0819 - just 4 pips above our T3 target of 1.0815 - before reversing. We were stopped out at 1.0895 on the reversal for +45 pips on the final portion.
Outcome Summary
| Metric | Value |
|---|---|
| Portion 1 (40%) | +45 pips at T1 |
| Portion 2 (40%) | +80 pips at T2 |
| Portion 3 (20%) | +45 pips (stopped at breakeven+) |
| Weighted Average | +56 pips |
| Dollar P&L | +$728 on $250 risk |
| Effective R-Multiple | 2.8R |
Why This Trade Worked
1. Higher Timeframe Alignment
The daily was bearish. The weekly had clear sell-side targets. We were not fighting the trend - we were joining it. This is the most important factor in any ICT trade.
2. Clean Order Block
The OB was formed by a single, well-defined bullish candle before an impulsive move. Messy, multi-candle OBs are less reliable. Clean OBs show clear institutional intent.
3. Kill Zone Timing
The entry happened during the London/New York overlap. This is when the highest volume and most institutional activity occurs on EUR/USD. Entries outside kill zones have significantly lower success rates.
4. Liquidity Target Was Clear
We knew where the sell-side liquidity was sitting (1.0810 area). Having a clear target based on liquidity pools - not arbitrary support levels - gives the trade a logical destination.
Lessons Learned
1. The Retest is the Trade
Entering on the BOS itself is tempting but risky. You get a worse price, wider stop, and less confirmation. Waiting for the OB retest gives you a precise entry with a tight stop and clear invalidation.
2. Not Every OB Gets Retested
This is a crucial point. Sometimes price breaks structure and never retests the OB. It just keeps going. You must accept that you will miss some moves. The setups you do catch will be high-quality with favorable risk-to-reward.
3. Buffer Your Stop
Placing your stop exactly at the OB high is asking to get stopped out by a wick. The 8-pip buffer we used was the difference between a winning trade and a frustrating stop-out.
4. Kill Zone Timing is Not Optional
If the rejection had happened during the Asian session, we would have been much less confident. ICT concepts work best during high-volume sessions. The Asian session on EUR/USD simply does not have enough institutional participation to validate most setups.
5. Near Misses Happen
T3 was missed by 4 pips. This will happen regularly. The lesson is not to chase those last few pips. Our T1 and T2 exits were disciplined, and the overall trade was highly profitable. Perfection is the enemy of profitability.
Key Takeaways
- Always start with the higher timeframe bias. If the daily is bearish, only look for shorts on the 4H and 1H.
- The order block is the origin of the impulsive move. Find the last opposing candle before the BOS to locate it.
- Wait for the retest. Do not chase the BOS move. Let price come back to your level.
- Use kill zone timing. London and New York sessions provide the institutional volume that makes ICT setups work.
- Define all targets before entry. Know your T1, T2, and T3 based on liquidity pools and structure, not guesswork.
This trade example uses concepts taught in the ICT Smart Money Concepts lesson. Review that lesson for the complete framework before attempting similar setups.