The last opposing candle before a strong move — marks the zone where institutional participants built positions.
A bullish order block is the last red candle before a strong rally; a bearish order block is the last green candle before a sell-off. The theory: banks and institutional traders (smart money) built their positions here. When price later returns to the zone, the same participants meet their old order clusters again — frequently sparking a reaction in the same direction as the original move.
Gold H4: strong rally from 2380 to 2440 USD. The last red candle before the rally sat at 2375 — a classic bullish order block. Two weeks later price tests the zone and rallies again.