Have you ever wondered why certain memecoins pump really hard after a period of inactivity? This phenomenon happens more often than you might think. If you know how to spot these patterns, there’s a good chance you can make money trading meme coins. These patterns are called “Order Blocks”. We have metioned this “Order Block Trading Strategy” at our last article. (Reference: Mastering Memecoins Trading: Part 1 – Beginner Guide: https://airdroplet.com/airdrop/memecoins-trading-beginner-guide/) In this article, we’ll show you how to spot Order Block so that you can win your memecoins trades.
What are Order Blocks?
An Order Block is a zone of interest for buying opportunities. You draw an Order Block from the first swing low, but this must be preceded by significant lateral movement. For the Order Block to become more valid, you need to see the price touching that order block repeatedly. The longer this Order Block remains, the stronger it becomes, potentially leading to a substantial pump afterwards.
Why Order Blocks Exist?
Order Block exist because they are areas of bidding interest. This concept works particularly well for older, more mature memecoins with large communities and teams. They attract smart investors, and in order for these investors to establish positions, they need to buy at lower bids. Hence, the term “order block” exists where large orders are made.
Order Blocks VS Support and Resistance
Order blocks are essentially a form of support, but they emphasize horizontal technical analysis (TA) lines rather than angular trend lines or parallel channels. Among the assets traded in crypto, memecoins tend to respect horizontal TA lines the most. These Order Block act like magnet zones. the price always seems to retrace down to these zones before heading upwards again.
Practical Example: Spotting an Order Block
Let’s take $BILLY as an example. On the four-hour timeframe, you can spot an order block being formed. After a dip, you’ll notice people buying in this zone. The price keeps touching this line, indicating demand. Often, you’d want the price action to touch the order block again for a good entry. This allows you to dollar-cost average (DCA) into your position.
Drawing an Order Block
There are two reliable methods for drawing an Order Block. First, find the first swing low with significant lateral movement following it. Draw this out to the right. Another method is identifying where price action consistently touches a level, even if it’s not a swing low. Both methods help you draw effective order blocks.
Does the Order Block Work for All Memecoins?
Not all memecoins exhibit the same price action patterns. For an Order Block to be effective, the coin must have long lateral movements within a specific range. Fundamentally strong memecoins—those with solid narratives, communities, and marketing—are more likely to exhibit these patterns.
Choosing the Right Timeframe
Why use the four-hour timeframe? One candle in a four-hour timeframe contains significant market action, making it a reliable choice for mid-to-long-term trades. The wicks on these candles tell stories of buyer and seller exhaustion, providing essential insights for traders.
The Flexibility of Order Blocks
Trading Order Blocks is primarily about swing trading. You’ll hold positions for days, weeks, or even months. This flexibility allows you to capitalize on price increases from the order block zone, leading to potentially significant profits. For instance, if the price increases by 20-30%, even modest investments can yield thousands of dollars.
In conclusion, Order Blocks provide a structured approach to trading meme coins, simplifying your buying decisions and increasing your chances of success. Remember, this strategy is particularly effective for those who don’t want to stare at charts all day.