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FVG

An FVG (Fair Value Gap) is a price imbalance created when the market moves rapidly, leaving gaps in the price chart that traders expect to be filled. It is identified by a three-candle pattern and can be used in trading to find entry opportunities, set target levels, and manage stop-loss placements. FVGs are more effective in trending markets and should be combined with other trading tools for improved accuracy.

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58 views

FVG

An FVG (Fair Value Gap) is a price imbalance created when the market moves rapidly, leaving gaps in the price chart that traders expect to be filled. It is identified by a three-candle pattern and can be used in trading to find entry opportunities, set target levels, and manage stop-loss placements. FVGs are more effective in trending markets and should be combined with other trading tools for improved accuracy.

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Mobin Jobs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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An FVG (Fair Value Gap) is a concept commonly used in price action and smart money trading

strategies. It refers to a price imbalance or inefficiency in the market, created when the price moves too
quickly in one direction, leaving behind an unfilled gap in the price chart. Traders view FVGs as areas
where the price is likely to return to “fill” the gap, as the market seeks equilibrium.
What Is an FVG?
An FVG (Fair Value Gap) is the gap between:
• The high of one candle,
• And the low of another candle in the opposite direction, with one or more candles in between.
This creates an “inefficiency” in the price action because not all buy and sell orders were matched during
the rapid price movement.
Characteristics of an FVG
1. Created by Strong Impulse Moves:
• Usually occurs during periods of high volatility or strong market trends.
• Common after news releases, major announcements, or high-volume trading sessions.
2. Imbalance in Orders:
• Indicates that institutional orders were left unfilled as price moved quickly, leaving gaps.
3. Acts as a Magnet:
• Price often revisits the FVG zone later to fill the gap, as the market seeks to balance buy and sell
orders.
4. Visible on All Timeframes:
• Found on lower timeframes (like 1-minute) for scalping or on higher timeframes (like daily) for
swing trading.
How to Identify an FVG
1. Look for a three-candle pattern:
• Candle 1 (First): This is the initial move that creates the imbalance.
• Candle 2 (Second): This is the large impulsive candle that leaves the gap.
• Candle 3 (Third): The next candle may fail to completely overlap the body of Candle 1, creating a
gap between the high/low of Candle 1 and Candle 2.
2. Mark the Gap:
• Draw a box from the high of Candle 1 to the low of Candle 3 (or vice versa for bearish moves).
How to Use FVG in Trading
1. Entry Opportunities:
• Look for price to return to the FVG zone before continuing in the direction of the trend.
• Combine FVGs with other confluences like support/resistance, order blocks, or trendlines.
2. Setups:
• Bullish FVG: When the price moves upward quickly, creating a gap below. When price retraces
to the FVG, it often acts as support.
• Bearish FVG: When the price moves downward quickly, creating a gap above. When price
retraces to the FVG, it often acts as resistance.
3. Target Levels:
• Use FVG zones as target areas for partial profit-taking, as price often gravitates toward these
levels.
4. Stop-Loss Placement:
• Place your stop just beyond the FVG to minimize risk, depending on the direction of your trade.
Example
• Bullish FVG:
• A large green (bullish) candle pushes price upward, and the next candle doesn’t retrace fully to
cover the gap left by the first candle.
• The unfilled area below the candle becomes a bullish FVG. Traders wait for price to retrace into
this area and look for buying opportunities.
• Bearish FVG:
• A large red (bearish) candle pushes price downward, and the next candle doesn’t retrace fully to
cover the gap left by the first candle.
• The unfilled area above the candle becomes a bearish FVG. Traders wait for price to retrace into
this area and look for selling opportunities.
Key Tips
1. Combine FVGs with other tools like order blocks, support/resistance, and market structure for
better accuracy.
2. FVGs are more reliable in trending markets than in ranging markets.
3. Use higher timeframes for strong FVG zones that have more significance.
Would you like me to explain with an example or chart pattern for clarity?

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