The Breaker Block is one of the concepts in the ICT trading style. This method focuses on the break of Order Blocks (OB) and their transformation into new zones for price retracement, creating an entry area for trading based on the Breaker Block (BB) strategy.
What is a Breaker Block?
A Breaker Block is an Order Block (OB), broken byprice, which transforms into a new support or resistance zone for price retracements. This shift usually occurs due to a Liquidity Sweep and a Market Structure Shift (MSS).
Types of Breaker Blocks
Breaker Blocks (BB) exist in two forms:
- Bullish
- Bearish
Bullish Breaker Block
A bearish Order Block (OB−) is broken by an upward price movement. After the break, it shifts to act as a support zone, aiding further price increases.
Bearish Breaker Block
A bullish Order Block (OB+) is broken by a downward price movement. After the break, it shifts to act as a resistance zone, aiding further price decreases.
Principles for Identifying a Breaker Block (BB)
To validate a Breaker Block, the following points should be assessed:
- Liquidity Sweep: At first, price will capture liquidity located behind a specific zone
- Order Block Break: Price breaches the upper limit (in bearish OB) or lower limit (in bullish OB), invalidating it
- Market Structure Shift (MSS): A confirmed trend reversal (from bullish to bearish or vice versa) must occur
Step-by-Step Guide for Trading with Breaker Blocks
To execute the Breaker Block trading strategy, follow the steps below:
#1 Identify the Market’s Overall Trend
Determine the market’s overall direction using higher timeframes to ensure your BB aligns with the main trend.
#2 Wait for a Liquidity Sweep
Wait for the price to move toward a liquidity pool, absorb it, and then reverse.
#3 Identify the Order Block Break (OB)
When the price breaks an Order Block, it will turn into a Breaker Block (BB):
- If the price closes above a bearish Order Block, a Bullish Breaker Block forms
- If the price closes below a bullish Order Block, a Bearish Breaker Block forms
#4 Enter the Trade
Once the Breaker Block area forms, wait for the price to retrace to this zone and enter the trade with MSS or CHoCH confirmation signals.
In the image below, a short trade entry using this strategy can be seen:
Now, let's define trade parameters for both bullish and bearish setups:
Bullish Breaker Block
- Entry Point: When the price retraces to the BB zone
- Stop Loss (SL): Slightly below the BB area
- Take Profit (TP): Liquidity levels on the opposite side
Bearish Breaker Block
- Entry Point: When the price retraces to the BB zone
- Stop Loss (SL): Slightly above the BB area
- Take Profit (TP): At liquidity levels on the opposite side
Note: To simplify the identification of Breaker Blocks, you can use the indicator developed by the [TFlab] team:
- TradingView version of the Breaker Block indicator
- MetaTrader 4 version of the Breaker Block indicator
- MetaTrader 5 version of the Breaker Block indicator
Best Timeframes and Markets for Breaker Blocks
The Block Breaker strategy, adheres to a specific timeframe for use:
Timeframes
- Use daily timeframes to analyze overall trends
- Lower timeframes (5 or 15 minutes) are suitable for precise entries
Markets
- Forex, futures, and cryptocurrency markets
Advantages and Limitations of the Breaker Block Strategy
Advantages | Limitations |
Accurately identifies zones with liquidity bias. | Requires advanced skills for proper zone identification |
Broad applicability across different markets | Risk of false signals in highly volatile markets |
Enhances trading precision when combined with MSS | - |
Comparison of Breaker Block and Order Block
- Order Block: A zone expected to reverse or continue price movement
- Breaker Block: When the price breaks an Order Block, it transforms into a Breaker Block, reversing its role (support to resistance and vice versa)
Conclusion
The Breaker Block strategy focuses on identifying broken Order Blocks and capturing liquidity to pinpoint precise entry and exit points in the market.
This approach requires a thorough understanding of market structure, suitable timeframes, and confirmation signals. It is applicable across various markets and timeframes.
