Breaker Blocks (BB) Explained
Breaker Blocks (BB) are a trading concept used by price action traders (also known as SMC or ICT traders). They locate areas where there is a large amount of buyers or sellers on a chart, where traders can enter positions to profit. In this article, we cover what breaker blocks are, how to locate them, the best strategies for using them, and the theory behind them.
What is a Breaker Block (BB)?
A Breaker Block (BB) is an invalidated order block. These zones act similarly to broken resistance levels turning into support. In order to understand BBs, it’s essential to understand what an Order Blocks (OB) is. When a bearish OB is invalidated, it turns into a bullish breaker block. When a bullish OB is invalidated, that zone turns into a bearish breaker block. These zones can be used to spot potential market reversals and provide trade entry opportunities. If you’re unfamiliar with the concept of Order Blocks, you can learn about them here.
How Do You Find Breaker Blocks?
As mentioned above, breaker blocks are formed when an order block is invalidated. To identify a bullish breaker block, find a bearish order block that was invalidated. To identify a bearish breaker block, find a bearish order block that was invalidated. Some traders like to consider an order block as invalidated when a candle wick breaches the top or bottom of the zone, while others wait for a candle close above or below the zone.
How To Find a Bullish Breaker Block
To find a bullish breaker block, you will first need to identify a bearish order block. Then, you’ll wait for either a candle to close above the zone or a wick to go above the zone. Once this happens, the zone will be considered a bullish breaker block. You can look for long trade opportunities at the newly formed bullish breaker block zone.
How to Find a Bearish Breaker Block
To find a bearish breaker block, you will first need to identify a bullish order block. Then, you’ll wait for either a candle to close below the zone or a wick to go under the zone. Once this happens, the zone will be considered a bearish breaker block. You can look for short trade opportunities at the newly formed bearish breaker block zone.
How To Trade With Breaker Blocks
Since breaker blocks are formed from invalidated order blocks, these zones are considered areas with high amounts of market activity. Thus, we want to aim to take trades at these zones if we have additional confluence. When price is retesting a bullish breaker block, we should look for long trade opportunities. And, if price is retesting a bearish breaker block, we should look for short trade opportunities. You can pair Liquidity Grabs with breaker blocks to find profitable trade setups.
Long Trade Example
In this long trade example, a bearish Order Block is first formed. Price continues to go down, before a bullish liquidity grab is detected. This bullish liquidity grab gives us confluence to look for long trade opportunities. A few candles later, a bullish candle closes above the bearish Order Block, invalidating it, and turning it into a bullish Breaker Block. Once price retests the bullish Breaker Block, we can set our stop loss slightly below the zone and target a 1:2 risk-to-reward trade.
Indicators used in this trade:
Short Trade Example
In this short trade example, a bullish Order Block is first formed. Price continues to go up, before a bearish liquidity grab is detected. This bearish liquidity grab gives us confluence to look for short trade opportunities. A few candles later, a bearish candle closes below the bullish Order Block, invalidating it, and turning it into a bearish Breaker Block. Once price retests the bearish Breaker Block, we can set our stop loss slightly above the zone and target a 1:2 risk-to-reward trade.
Indicators used in this trade:
What is the difference between an Order Block and Breaker Block?
Order Blocks are formed at swing points in the market, after a quick reversal. They act as areas where there's a large amount of buyers or sellers. Breaker Blocks are formed when these Order Blocks are invalidated by either a candle close or wick.
What is the best timeframe to trade Breaker Blocks on?
Breaker Blocks work on all timeframes depending on your trading style (scalping, day trading, swing trading, investing). However, in trading there’s a general rule that higher timeframes are more consistent and reliable than lower time frames. It's best to use multiple timeframes when making your trading decisions so you have a bigger picture look at the market.
How do you identify strong Breaker Blocks?
The best way to have consistent results when trading with Breaker Blocks is to trade with confluence. You shouldn't enter a trade just because price is retesting a Breaker Block. You should have other forms of confluence to enter the trade such as a Liquidity Grab, Fair Value Gap, or confirmation of the market trend.