What is an order block?

An order block is a grouping of buy or sell orders for a specific security that are held by a brokerage firm on behalf of a client. These orders are typically placed by institutional investors or traders who want to execute a large trade without significantly impacting the market price of the security. By keeping the orders within an order block, the brokerage firm can execute the trade in a more discreet manner.

Order blocks are typically used for large trades that exceed the size of the market's liquidity, as executing such trades all at once could cause significant price fluctuations. By breaking up the trade into smaller chunks within the order block, the investor can gradually enter or exit a position without drawing too much attention to their activity.

Order blocks are often used in conjunction with algorithmic trading strategies to execute trades in a controlled and efficient manner. By utilizing order blocks, investors can minimize market impact and achieve better execution prices for their trades.