Order block and market structure: BOS, CHoCH and MSS explained

An order block is the last candle (or group of candles) of the opposite color before a strong move that breaks structure. The idea from ICT and the smart money world is that large orders were left there and price will return to that zone, where it's expected to be defended. To mark one properly you first have to read the market structure: the sequence of highs and lows that tells you whether the trend continues (BOS) or may be turning (CHoCH, MSS).

This guide explains how that structure is read, how to mark an order block step by step, what premium and discount are, what EQH/EQL are, how to build a top-down bias, and how an order block differs from a supply and demand zone. At the end, what the data says: the bounce off an order block failed more than half the time in the only public backtest with a sample.

A note on sources: there is no glossary written by Huddleston himself. The definitions come from secondary sources and are presented as the most cited version.

Free tool: if you use NinjaTrader 8, you can download the structure and order block indicator we built at El Trader Financiado for the community. See the indicator and download it.

What market structure is

Structure organizes the chart into swing highs and lows. In an uptrend, price makes higher highs (HH) and higher lows (HL). In a downtrend, lower highs (LH) and lower lows (LL). On top of that, three breaks are defined.

BOS (break of structure)

This is the break of a swing in the direction of the trend: a new higher high in an uptrend or a new lower low in a downtrend. It confirms continuation.

CHoCH (change of character)

This is the first break against the trend: in an uptrend, the first low taken out. It warns of a possible reversal; it doesn't confirm it. Some indicators distinguish the plain CHoCH from the "CHoCH+", which comes after a failed high or low. In that labeling approach, a BOS can only appear after a CHoCH: first the character changes, then the new direction is confirmed.

MSS (market structure shift)

This is the term from ICT's 2022 model: according to the usual description, an energetic reversal move that closes through the most recent opposing swing on the execution timeframe. Two conditions separate it from any ordinary CHoCH: displacement (a strong move, which usually leaves a fair value gap) and a prior liquidity sweep. A break with no sweep is discarded as noise.

Internal structure and swing structure

This is the distinction that prevents the most mistakes. Internal structure is the short swings: frequent and choppy. Swing structure is the long-term ones: slower and more solid. In the most widespread structure indicators, internal uses windows of 5 to 49 candles and swing uses 50 to 100. The same move can be an internal CHoCH and, at the same time, just a pullback inside an intact swing trend. That's why you always have to declare the scale.

What an order block is

In the most widespread version of the method, it's the last opposing candles before a move, which are expected to be defended when price returns. A bullish order block is the last bearish candle before the impulse that breaks a high. A bearish one is the last bullish candle before the impulse that breaks a low.

What separates a useful order block from any opposing candle is context. It must:

• Sit at the origin of a move with displacement.
• Be tied to a structure break (BOS or CHoCH/MSS).
• Remain uninvalidated: if price closes on the other side of the block, it no longer counts.

We haven't found a primary rule on whether invalidation is measured by wick or by close. Pick one and stick with it. When an order block fails, it doesn't always disappear: it can become a breaker or a mitigation block, which we explain in the breaker block guide.

Premium and discount

This is ICT's way of saying "expensive" and "cheap" inside a range. You draw the range of the move you're trading (swing low to swing high) and its 50%. The upper half is premium and the lower half is discount. The convention is to look for buys in discount and sells in premium. A bullish order block sitting in premium is an expensive buy; one in discount fits the bias.

EQH and EQL (equal highs and lows)

Two or more highs (EQH) or lows (EQL) at almost the same price. They're marked as liquidity pools: the reading is that stops accumulate there and price tends to sweep them before turning. It's one of the levels marked before the session, along with the previous day's high and low and the Asia and London extremes.

How to read structure and mark an order block step by step

1. Top-down bias. Start on daily, 4 hours, or 1 hour. Is there a BOS in your favor or a recent CHoCH? Where is the obvious liquidity (EQH/EQL, previous day high or low)?
2. Work zone on 15 minutes to 1 hour. Mark the range, its 50% (premium/discount), and the pools that could be swept.
3. Declare the scale. Decide whether you trade internal or swing structure, and don't mix them in the same read.
4. Wait for the break with displacement. With the trend (BOS) for continuation; against it after a sweep (MSS) for a reversal. Require a close beyond the swing, not just a wick.
5. Mark the order block of that break. The last opposing candle before the impulse. Edges and 50%.
6. Check the location. Is it in discount (if you're buying) or in premium (if you're selling)? Does it coincide with an FVG from the same move?
7. Define the invalidation before entering. Close on the other side of the block = out.

Strategies with order blocks

SMC strategies with order blocks repeat the same skeleton as the rest of ICT: context → break → pullback to the zone → target at liquidity.

Continuation: BOS and pullback to the order block

Price breaks in the direction of the trend, returns to the origin of the impulse, and continues. This is the version a forex broker coded for its backtest: limit order at the 50% of the order block and the stop just outside the swing.

Reversal: sweep, MSS, and order block

After a sweep of a pool (EQH, previous day high), price turns with an MSS. That move usually leaves a new order block and a new FVG. You enter on the pullback to either one, with the stop beyond the swept extreme. It's the same sequence as ICT's 2022 model, with the order block as the zone instead of the FVG.

Order block inside the OTE

The OTE is a Fibonacci drawn over the impulse, with the 0.62-0.79 band and 0.705 as the preferred point. If the order block falls inside that band and in discount (for longs), both readings point to the same zone. Stop beyond the swing that anchors the Fibonacci.

The New York morning killzone runs from 08:30 to 11:00 NY. We explain the windows in ICT killzones.

Order block vs supply and demand zone

The difference is one of convention, not of mechanism. The order block marks only the last opposing candle before the impulse and requires displacement and a structure break; the supply and demand zone marks the whole base and doesn't need that break. The block gives a better price and a shorter stop, but it gets invalidated more easily. The full comparison and the classic base method (RBR, DBR, DBD, RBD) are in supply and demand zones.

Common mistakes

• Mixing scales. Calling a CHoCH an internal break while the swing structure is still intact. It's the number one mistake with BOS and CHoCH.
• Counting wicks as breaks. If your rule is close-based, a wick above the high is not a BOS; it may be a sweep.
• Marking any opposing candle. With no displacement or break behind it, it's not an order block, it's just a candle.
• Treating every order block as a guaranteed bounce. The data in the evidence section contradicts it.
• Ignoring premium/discount. Buying an order block in the expensive part of the range goes against the method's own logic.
• Measuring the OTE over moves that aren't impulses.

What to combine it with

• Fair value gap: the MSS usually leaves an FVG next to the order block. Both zones on the same move give a tighter entry. See fair value gap.
• Levels and killzones: the pools that get swept before the MSS (PDH/PDL, session extremes) and the time window. See ICT killzones.
• SMT divergence: when NQ sweeps a low and ES doesn't, it's a confirmation used by the ICT community. See SMT divergence.
• Breakers: what happens when the order block fails. See breaker block.
• VWAP and volume profile as neutral location filters: is the block above or below the day's value? See VWAP and volume profile.

If you want the basics of reading candles and swings without ICT vocabulary, it's in price action trading.

What the evidence says

High-and-low structure is an objective way to describe the trend. What isn't proven is that price respects order blocks more than any other zone.

The only public backtest with a declared sample was published by a forex broker: 1,000 trades in forex, with no clear dates or costs and with a conflict of interest. The bounce off an order block failed 56.9% of the time. With a higher-timeframe filter, killzone, and a 1:2.5 R:R, the hit rate rose from 41.2% to 58.4%. It's not futures and has no placebo, so take it as guidance.

What is documented is the basis of the sweep: Osler found, with 9,667 real orders, take-profits clustered at round numbers and stops just behind them (FRBNY). That supports the idea that obvious levels accumulate stops, not the full SMC framework.

How it fits in a prop firm

The stop of an order block goes outside the swing or beyond the swept extreme. In NQ it can be large:

With a $1,000 daily loss limit, one 30-point stop on NQ ($600) eats 60% of the day; a second one no longer fits. The practical rule: if the structural stop doesn't fit your risk per trade, drop down to micros or pass.

Also:

• News. The NY killzone starts at the time of CPI and NFP (08:30 NY). Many prop firms restrict trading around these releases; check your firm's rules before leaving a limit order on a block.
• Consistency. Targets at distant liquidity concentrate profit in a few days, and that can clash with consistency rules.
• Daily loss limit on the platform. Set it in your software as well as respecting the firm's.

Compare each firm's daily loss and trailing drawdown in the comparator.

Free NinjaTrader indicator

At El Trader Financiado we built a structure indicator for NinjaTrader 8 that marks BOS, CHoCH, and MSS, and leaves only the active order blocks drawn. It's free, built for the community, and available in English and Spanish. You can download it with its settings guide on the market structure indicator page.

Frequently asked questions

What is an order block in trading?

The last candle of the opposite color before an impulse that breaks structure. ICT theory says large orders were left there and price will return to that zone; that is a claim of the method, not a measured fact.

What is the difference between BOS and CHoCH?

A BOS breaks a swing in the direction of the trend and confirms continuation. A CHoCH is the first break against the trend and warns of a possible reversal.

What is the difference between CHoCH and MSS?

Both break against the trend. The MSS also requires displacement (a strong move that usually leaves an FVG) and a liquidity sweep beforehand.

What are premium and discount for an order block?

You draw the range of the leg you're trading and its 50% level. The upper half is premium (expensive) and the lower half is discount (cheap). The convention is to look for buys at order blocks in discount and sells in premium.

What happens when an order block fails?

If price closes on the other side, the block is invalidated. Depending on how the break happens, it can become a breaker or a mitigation block.

What timeframe do you mark order blocks on?

Bias on daily, 4 hours, or 1 hour; the zone on 15 minutes to 1 hour; execution on 1 to 5 minutes. What matters is not mixing internal structure with swing structure.

Keep learning

• The 8 free indicators for NinjaTrader 8
• Breaker block, mitigation block, and the Unicorn model
• Fair value gap: what it is and how to trade it
• Supply and demand zones
• Discounts on futures prop firms