Order blocks are critical structures in price action trading and serve as footprints of institutional orders within the market. Understanding the Master Order Block (MOB) and the concepts of balance and imbalance is essential for any trader who wants to tap into these significant price action signals.

What is a Master Order Block?

A Master Order Block refers to a price level or zone where major buying or selling activity occurs, often initiated by institutions. It typically represents a strong area of support or resistance in the market. When price returns to this zone, it often reacts strongly, either bouncing back or breaking through, revealing the true intentions of the market participants.

Balanced vs. Imbalanced Scenarios

The charts in the images show two distinct scenarios:

Balanced Scenario

In a balanced scenario, there is no gap between the 1st and 3rd candles.

This indicates that buyers and sellers are in equilibrium, and the price movement reflects a fair exchange between them.

There is no significant "vacuum" in price, meaning the orders were filled smoothly.

Imbalanced Scenario

In an imbalanced scenario, there is a visible gap between the 1st and 3rd candles.

This gap represents a Fair Value Gap or inefficiency in the market. It shows that there was more aggressive buying or selling, leading to an imbalance.

Imbalances suggest that price may revisit this zone in the future to "fill" or mitigate the gap.

Importance of Imbalances (Fair Value Gaps)

Imbalances or inefficiencies—also known as Fair Value Gaps—are critical because they reveal that the market was temporarily out of equilibrium. These gaps often act as magnets, pulling the price back to them as the market seeks balance. Traders can use these areas to anticipate future price reactions:

Bullish Fair Value Gap: Indicates strong buying pressure; price may revisit to find new buyers.

Bearish Fair Value Gap: Indicates strong selling pressure; price may revisit to find new sellers.

Why Master Order Blocks Matter

Master Order Blocks combined with the concepts of balance and imbalance help traders identify:

Key areas of support and resistance.

Potential reversal or continuation zones.

Where smart money might be entering or exiting the market.

By understanding how to read and identify these scenarios, traders gain a significant edge in forecasting potential price movements and making more informed trading decisions.