A Rejection Block is a price zone where the price touches but cannot break through, resulting in a reversal.
This phenomenon usually occurs at significant market highs or lows and sometimes after liquidity has been collected.
Traders utilize this area to identify potential price reversal points for entering or exiting trades.
What is a Rejection Block?
A Rejection Block forms when the price touches previous market highs or lows and absorbs the liquidity in those areas.
Long wicks appear on the chart at this point, indicating a reversal from that zone. These long wicks are the Rejection Blocks, which traders use to identify price reversal points.
To quickly identify these areas, traders can use specialized indicators provided by the Trading Finder suite:
- Rejection Block Indicator for MetaTrader 4
- Rejection Block Indicator for MetaTrader 5
- Rejection Block Indicator for TradingView
Bullish Rejection Block
To identify trading setups using a Bullish Rejection Block, follow these steps:
- A candlestick with a long lower wick may form when the price touches previous market lows and absorbs their liquidity. This indicates reluctance for further price decline and signals the start of an upward trend;
- The long lower wick is identified as the Rejection Block in this case;
- If the price revisits below the body of the candlestick in the block (to hunt sell-side stops), this creates an opportunity for a buy trade;
- To limit losses if the price falls, set a stop loss between 10 and 20 pips below the Rejection Block.
Bearish Rejection Block
To identify trading setups using a Bearish Rejection Block, follow these steps:
- A candlestick with a long upper wick may form when the price touches previous market highs and absorbs their liquidity. This indicates a reluctance to increase the price further and signals the start of a downward trend.
- In this scenario, the long upper wick becomes the Rejection Block.
- If the price revisits above the candlestick in the block (to hunt buy-side stops), this creates an opportunity for a sell trade.
- Set a stop loss between 10 to 20 pips above the Rejection Block to manage risks in case of unexpected upward movements.
Key Characteristics of Rejection Blocks
- Long Wicks: Rejection Blocks often feature long wicks, reflecting the price's failed attempt to break a level;
- Liquidity Sweep: Despite touching previous highs or lows and absorbing liquidity, the price changes direction;
- Formation at Significant Levels: These blocks often form at key market points (major highs and lows);
- Indicate Price Weakness: These blocks demonstrate the price's inability to break a specific level, often leading to reversals.
Are ICT Rejection Blocks Reliable?
Yes! Even if the price does not react to Order Blocks or Fair Value Gaps, the Rejection Block is often the last opportunity within the market cycle. For this reason, the likelihood of a profitable position increases.
Order Block: It usually forms at Fibonacci retracement levels such as 50%, 62%, or 70%.
Rejection Block: It always forms at deeper levels, such as 80% or 90% of Fibonacci.
Conclusion
Trading with Rejection Blocks is one of the most effective ICT trading methods, identifying price reversals at deep retracement levels (80% and 90% Fibonacci).
This approach, with tight stop losses and high risk-reward ratios, is ideal for managing risk and improving trading returns.
