Fair Value Gap (FVG) in Trading refers to a price range on a chart where an imbalance exists between buyers and sellers, typically created by a sudden and strong price movement that leaves a gap with little or no trading activity.
What is an FVG?
It is a zone formed when price moves impulsively in one direction, causing a gap between the wicks or bodies of candles, indicating a market inefficiency or imbalance between supply and demand.
Usually identified as a three-candle pattern where the middle candle is large relative to the candles before and after it, and there is no overlap between the high of the first candle and the low of the third candle.
This gap signals that the market has not fully "filled" or traded through this price range, suggesting that price may return to this zone to "fill" the gap before continuing in the original direction.
Why is FVG Important in Trading?
FVGs help traders identify areas where price is likely to retrace or pause, offering potential entry or exit points.
They represent zones of imbalance where smart money (institutional traders) may have left orders unfilled, which price often revisits to achieve fair value.
Traders use FVGs to anticipate trend continuation or reversals by waiting for price to return to these gaps and react accordingly.
How to Identify an FVG?
Look for a large impulsive candle flanked by smaller candles that do not overlap the large candle’s wick extremes.
Draw a box between the high of the candle before the large candle and the low of the candle after it (for bullish FVG), or vice versa for bearish FVG.
The price zone inside this box is the Fair Value Gap.
Types of FVG:
Bullish FVG: Created by a strong upward move, signaling a potential support zone where price may retrace before moving higher.
Bearish FVG: Created by a strong downward move, signaling a potential resistance zone where price may retrace before moving lower.
In essence, FVGs highlight market inefficiencies where price is expected to return to "fill" the gap, offering traders strategic zones for potential trades.
WATCH GOLD REACTION AT 3350 .on geopolitical instability between Iran and Israel gold could touch 3500 and hit 3525-3530 and sell correction based on structure.
#gold #dxy
What is an FVG?
It is a zone formed when price moves impulsively in one direction, causing a gap between the wicks or bodies of candles, indicating a market inefficiency or imbalance between supply and demand.
Usually identified as a three-candle pattern where the middle candle is large relative to the candles before and after it, and there is no overlap between the high of the first candle and the low of the third candle.
This gap signals that the market has not fully "filled" or traded through this price range, suggesting that price may return to this zone to "fill" the gap before continuing in the original direction.
Why is FVG Important in Trading?
FVGs help traders identify areas where price is likely to retrace or pause, offering potential entry or exit points.
They represent zones of imbalance where smart money (institutional traders) may have left orders unfilled, which price often revisits to achieve fair value.
Traders use FVGs to anticipate trend continuation or reversals by waiting for price to return to these gaps and react accordingly.
How to Identify an FVG?
Look for a large impulsive candle flanked by smaller candles that do not overlap the large candle’s wick extremes.
Draw a box between the high of the candle before the large candle and the low of the candle after it (for bullish FVG), or vice versa for bearish FVG.
The price zone inside this box is the Fair Value Gap.
Types of FVG:
Bullish FVG: Created by a strong upward move, signaling a potential support zone where price may retrace before moving higher.
Bearish FVG: Created by a strong downward move, signaling a potential resistance zone where price may retrace before moving lower.
In essence, FVGs highlight market inefficiencies where price is expected to return to "fill" the gap, offering traders strategic zones for potential trades.
WATCH GOLD REACTION AT 3350 .on geopolitical instability between Iran and Israel gold could touch 3500 and hit 3525-3530 and sell correction based on structure.
#gold #dxy
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.