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Mitigation Blocks: How May Traders Identify and Trade Them?

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Mitigation Blocks: How May Traders Identify and Trade Them?

Understanding where institutional traders have left unfilled orders can provide insights into potential price reversals. Mitigation blocks represent specific zones on price charts where price movements stopped and reversed, offering traders a framework for anticipating future market behaviour.

Within the Smart Money Concept framework, these areas serve as possible reference points for entry and exit strategies. This article examines mitigation in trading, their distinguishing characteristics compared to breaker blocks, and practical applications in trading strategy development.

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Takeaways

  • A mitigation block is a price action concept identifying specific price zones where previous price movements halted and reversed. They mark potential areas for future market turns within Smart Money trading frameworks.
  • A bullish mitigation block forms during downtrends when price creates a higher low without breaking the previous low, often showing increased buying volume. Conversely, a bearish mitigation block develops in uptrends with a lower high formation and heightened selling pressure at resistance.
  • Mitigation blocks are often compared to breaker blocks, but there are significant differences between the two. Mitigation blocks form after failure swings where price doesn’t surpass the previous extreme, while breaker blocks occur when price creates a new high/low before reversing and breaking structure—indicating liquidity may have been taken.
  • Traders use mitigation blocks in trading by placing limit orders within validated zones, often after a new peak or trough confirms the block, while combining analysis with higher timeframe context for refined entries.

Definition and Function of a Mitigation Block

A mitigation block refers to a specific zone on a chart that indicates where previous movements have stalled and reversed, marking it as a potential area for future market turns. This concept within the Smart Money framework is popular among traders looking for strategic entry and exit points.

The idea behind these areas is rooted in the dynamics of supply and demand. When a currency pair reaches a level where buyers or sellers have previously entered the market in force, causing a reversal, it suggests a potential repeat of such actions when the price returns to the area.

Characteristics and How Traders Identify a Mitigation Block

Mitigation blocks can be bullish or bearish, each with distinct characteristics:

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  • Bearish Mitigation Block: This type forms during an uptrend and is identified by a significant peak followed by a decline and a failed attempt to reach or surpass the previous high, creating a lower high. When prices drop below the previous low, the price zone above the low becomes mitigation. It may be characterised by an increase in selling volume as the price approaches the level, signalling resistance and a potential downward reversal.
  • Bullish Mitigation Block: Conversely, a bullish type is established during a downtrend. It is characterised by a significant trough, followed by a rise to form a higher low, and a failure to drop below the previous low. As the price moves up, the zone below the high marks mitigation one. This area often shows an increase in buying volume as the price approaches, indicating support and a potential upward reversal.

To have a go at identifying your own blocks, you can head over to FXOpen’s TickTrader platform to access a world of currency pairs and over 1,200 charting tools.

Mitigation Block vs Breaker Block

Mitigation and breaker blocks are both significant in identifying potential trend reversals in trading, but they have distinct characteristics that set them apart. A mitigation block forms after a failure swing, which occurs when the market attempts but fails to surpass a previous peak in an uptrend or a previous trough in a downtrend. The pattern indicates a loss of momentum and a potential reversal as the price fails to sustain its previous direction.

On the other hand, a breaker block is characterised by the formation of a new high or low before the market structure is broken, indicating that liquidity has been taken. This means that although the trend initially looked set to continue, it quickly reverses and breaks structure.

In effect, a breaker appears when the market takes liquidity beyond a swing point before reversing the trend. A mitigation appears when the price doesn’t move beyond the trend’s most recent high or low, instead plotting a lower high or higher low before reversing the trend.

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Application of Mitigation Blocks in Trading

Areas of mitigation in trading can be important tools for identifying potential trend reversals and entry points. When they align with a trader’s analysis that anticipates a reversal at a certain level, it can serve as a robust confirmation for entry.

Traders can utilise these zones by placing a limit order within the area once it is considered valid. Validation occurs after a new peak or trough is established following the initial failure swing that forms the mitigation area.

If a liquidity void or fair-value gap is present, the trader may look for such a gap to be filled before their limit order is triggered, potentially offering a tighter entry. Stop losses might be placed beyond the failure swing or the most extreme point.

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Furthermore, if a mitigation block is identified on a higher timeframe, traders can refine their entry by switching to a lower timeframe. This approach is supposed to allow for a tighter entry point and potentially more effective risk management, as it offers more granular insight into the momentum around the area.

Common Mistakes and Limitations in Mitigation Blocks

While these blocks are valuable for trading, they come with potential pitfalls and limitations that traders should know.

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  • Overreliance: Relying solely on mitigation blocks without corroborating with other trading indicators can lead to misjudged entries and exits.
  • Ignoring Context: Using these zones without considering the broader market conditions may result in trading against a prevailing strong trend.
  • Misinterpretation: Incorrect identification can lead to erroneous trading decisions, especially for less experienced traders.
  • False Signals: Mitigation blocks can sometimes appear to signal a reversal but instead lead to a continuation of the trend, trapping traders in unfavourable positions.

The Bottom Line

Mitigation blocks remain a valuable tool for traders seeking to understand institutional behaviour. By highlighting areas where unfilled orders may influence future price action, they can support traders in decision-making. However, like any market concept, mitigation blocks should not be viewed in isolation. Traders combine them with broader market structure analysis, liquidity concepts, and strict risk-control practices.

If you are looking to apply these concepts in a practical trading environment, you can consider opening an FXOpen account to put theory into practice across dozens of currency pairs complemented by robust tools and insights.

FAQs

What Is a Mitigation Block?

A mitigation block is a price zone that identifies potential reversal points. It signals where a currency pair has previously stalled, indicating strong buying or selling pressure, suggesting similar reactions in future encounters with these levels.

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How Do Traders Identify a Mitigation Block?

Mitigation blocks are identified by analysing charts for areas where previous highs or lows were not surpassed, leading to a reversal. Traders look for a sequence of movements, including a swing high or low followed by a retracement that fails to exceed the previous swing.

What Is the Difference Between a Breaker Block and a Mitigation Block?

While both indicate potential reversals, a breaker block forms when the price makes a new high or low before reversing, suggesting a temporary continuation of the trend. In contrast, a mitigation block forms without creating a new extreme, indicating a direct loss of momentum and an immediate potential for reversal.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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Crypto World

XRP Jumps Nearly 20% as Ripple Teases Major XRPL Upgrades

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XRP Jumps Nearly 20% as Ripple Teases Major XRPL Upgrades

The token is outperforming the broader crypto market amid a string of Ripple announcements.

XRP outperformed the broader cryptocurrency market on Friday, Feb. 6, rising nearly 20% over the past 24 hours.

The token was trading around $1.50, after briefly touching a high near $1.53, per The Defiant’s price page. XRP’s market capitalization now stands at about $91.3 billion. XRP also strengthened against Bitcoin (BTC), gaining more than 13% on the BTC pair, according to CoinGecko. Meanwhile, 24-hour trading volume climbed to roughly $16.5 billion.

The rally came as investor sentiment improved following a series of Ripple announcements this week, with the latest being the company teasing major upgrades to the XRP Ledger (XRPL) on Feb. 5.

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In a blog post, Ripple outlined how new and upcoming features on the XRP Ledger would expand XRP’s real-world utility beyond payments. The company also said that XRP is increasingly being used across stablecoin settlement, FX, tokenized assets, and lending.

“With each use case, XRP’s role becomes more intertwined in institutional finance, either as the asset being moved, the bridge facilitating exchange, or the reserve currency backing network security,” the post reads.

Earlier this week, the team also announced that Ripple Prime added support for Hyperliquid – the largest decentralized perpetual futures platform by trading volume and open interest (OI), according to DeFiLlama. The move aims to provide institutional clients with on-chain derivatives liquidity through Ripple’s prime brokerage platform.

“At Ripple Prime, we are excited to continue leading the way in merging decentralized finance with traditional prime brokerage services, offering direct support to trading, yield generation and a wider range of digital assets,” said Michael Higgins, International CEO, Ripple Prime. “This strategic extension of our prime brokerage platform into DeFi will enhance our clients’ access to liquidity, providing the greater efficiency and innovation that our institutional clients demand.”

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XRP’s rebound comes amid a broader market downturn that has stretched for weeks. Bitcoin (BTC) is currently trading under $70,000 – a price point not seen since Nov. 2024. Meanwhile, Ethereum (ETH) is currently changing hands at $2,000, down 25% on the week.

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Gold Below $5,000 as Firmer Dollar Weighs

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Stocks Little Changed After Fed Decision

Gold prices edged lower in early trading, holding below the $5,000 mark in the absence of fresh catalysts and amid a stronger dollar.

Futures in New York fell 0.1% to $4,944 a troy ounce, while the U.S. dollar index—which measures the greenback against a basket of major currencies—is up 0.1% at 97.71.

“A stronger USD weighed on investor appetite,” ANZ analysts said. “This offset any gains coming from rising haven buying as geopolitical tensions rise in the Middle East.”

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Bitcoin Dips to $60k, TRM Labs Reaches Crypto Unicorn Status

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Bitcoin Dips to $60k, TRM Labs Reaches Crypto Unicorn Status

Cryptocurrency markets experienced a brutal sell-off this week as investor concerns grew over stagnating US liquidity following US President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve.

Bitcoin exchange-traded funds (ETFs) recorded three consecutive days of outflows, with $431 million exiting on Thursday, according to data from Farside Investors. Bitcoin’s (BTC) price briefly dipped to $60,074 on Friday before recovering above $64,930 as of 7:49 a.m. UTC.

Warsh — who previously served as a Fed governor from 2006 to 2011 — is expected to continue the interest rate cut trajectory. His nomination may also signal that broader market liquidity is expected to “stabilize rather than meaningfully expand,” Thomas Perfumo, economist at crypto exchange Kraken, told Cointelegraph.

The industry recorded its 10th-largest liquidation event on Jan. 31, as more than $2.56 billion in leveraged positions were wiped out, according to derivatives data platform CoinGlass.

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Top 10 largest liquidation events in crypto history. Source: Coinglass

TRM Labs completes $70M investment round at $1B, becomes crypto unicorn

Blockchain intelligence platform TRM Labs completed a $70 million Series C funding round, valuing it at $1 billion, becoming the latest crypto company to reach unicorn status.

The investment round was led by seed investor Blockchain Capital, with participation from Goldman Sachs, Bessemer Venture Partners, Brevan Howard Digital, Thoma Bravo, Citi Ventures and Galaxy Ventures, according to a Wednesday news release.

TRM Labs seeks to equip public and private institutions with AI solutions that combat cybercrime. The company defends against illicit activities that increasingly rely on automation.

“At TRM, we’re building AI for problems that have real consequences for public safety, financial integrity, and national security,” wrote Esteban Castaño, co-founder and CEO of TRM Labs.

“This funding allows our world-class team — and the people who will join us next — to innovate alongside institutions on the front lines of the most consequential threats, and expand the potential of AI to meaningfully improve how our critical systems are protected.”

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The $70 million round shows that capital is flowing into blockchain analytics platforms seeking to stop the spread of AI-fueled scams and cyberattacks, including from large traditional institutions.

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Avalanche tokenization hits Q4 high as BlackRock’s BUIDL expands onchain

Blockchain network Avalanche saw increasing institutional adoption across tokenized money market funds, loans and indexes in the fourth quarter, driving the value of real-world assets (RWAs) on the layer 1 to a new high.

The total value locked of tokenized RWAs on Avalanche rose 68.6% over the fourth quarter of 2025 and nearly 950% over the year to more than $1.3 billion, boosted by the $500 million BlackRock USD Institutional Digital Liquidity Fund (BUIDL) that launched in November, Messari research analyst Youssef Haidar said in a Jan. 29 report.

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Fortune 500 fintech FIS partnered with Avalanche-based marketplace Intain to launch tokenized loans in November, further boosting Avalanche’s TVL, Haidar said. Intain enables 2,000 US banks to securitize over $6 billion worth of loans on Avalanche.

The S&P Dow Jones also partnered with Dinari, an Avalanche-powered blockchain, to launch the S&P Digital Markets 50 Index, which tracks 35 crypto-linked stocks and 15 crypto tokens on Avalanche.

Change in Avalanche real-world asset tokenization over the last 12 months. Source: Messari

Traditional finance firms are increasingly confident about experimenting with tokenization, as the Securities and Exchange Commission has become more open to crypto products over the past year.

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ParaFi Capital makes $35M investment in Solana-based Jupiter

Jupiter said it has secured a $35 million strategic investment from ParaFi Capital, marking the first time the Solana-based onchain trading and liquidity aggregation protocol has taken outside capital after years of bootstrapped growth.

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The transaction involved token purchases at market prices with no discount and an extended lockup period and was settled entirely in Jupiter’s JupUSD stablecoin, the companies said. Financial terms beyond the $35 million investment were not disclosed.

Decentralization, Venture Capital, DeFi, Solana
Source: Jupiter

The investment comes as Jupiter has processed more than $1 trillion in trading volume over the past year and expanded beyond swap routing into perpetuals, lending and stablecoins, according to the company.

The deal also included warrants allowing ParaFi Capital to acquire additional tokens at higher prices, a structure the companies said was intended to reflect long-term alignment. 

The investment follows a recent expansion of Jupiter’s product offerings. In October, Jupiter rolled out a beta version of its onchain prediction market developed with Kalshi, followed in January by the launch of JupUSD, a Solana-native, dollar-pegged stablecoin built in partnership with Ethena Labs.

Jupiter’s native token (JUP) was up around 9% over the past 24 hours, according to CoinGecko data.

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Decentralization, Venture Capital, DeFi, Solana
Source: CoinGecko

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Aave winds down Avara, phases out Family wallet in DeFi refocus

Aave Labs said it is sunsetting its “umbrella brand” Avara in the company’s latest move to refocus on decentralized finance and simplify its branding.

Aave founder and CEO Stani Kulechov posted Tuesday on X that Avara, a company encompassing projects including the Family crypto wallet and previously the social media platform Lens, “is no longer required as we go all in on bringing Aave to the masses.”

Kulechov said the Apple iOS-based Family crypto wallet was also being wound down as the team has “learned that onboarding millions of users requires purpose-built experiences, such as savings, rather than generic, open-ended wallet experiences.”

The move marks Aave’s latest effort to refocus on products such as its flagship lending protocol as the project handed stewardship of Lens to the Mask Network last month, with Kulechov saying Aave’s participation in the protocol would be reduced to an advisory role so it can focus on DeFi.

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Source: Stani Kulechov

Kulechov said in his latest post that Aave was “now united as one team of world-class designers, engineers, and smart contract experts, aligned around a single mission: bringing DeFi to everyone.”

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Step Finance treasury wallets breached, $27M in SOL drained as STEP crashes 90%

Step Finance, a decentralized finance portfolio tracker on Solana, disclosed a security breach that led to the compromise of several treasury wallets, triggering a sharp sell-off in its native token.

“Earlier today, several of our treasury wallets were compromised by a sophisticated actor during APAC hours. This was an attack facilitated through a well-known attack vector,” the platform wrote in a post on X, adding that they have taken “remediation” steps.

Onchain data reviewed by blockchain security firm CertiK shows that roughly 261,854 Solana (SOL) (worth around $27.2 million) was unstaked and transferred from Step Finance-controlled wallets.

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Step Finance has not yet confirmed the total scale of the losses. The team also did not disclose how the attacker gained access, nor whether the incident stemmed from a smart contract flaw, compromised keys or an internal access issue. It also remains unclear whether any user funds were affected, beyond protocol-owned assets.

The compromised transaction. Source: Certik

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DeFi market overview

According to data from Cointelegraph Markets Pro and TradingView, most of the 100 largest cryptocurrencies by market capitalization ended the week in the red.

The privacy-preserving Zcash (ZEC) token fell 35% to record the week’s biggest decline in the top 100, followed by the Story (IP) token, down 34% during the past week.

Total value locked in DeFi. Source: DefiLlama

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education regarding this dynamically advancing space.