Understanding the Fair Value Gaps

1. Introduction to the Fair Value Gap (FVG)

In the intricate world of Forex trading, the Fair Value Gap (FVG) stands out as a vital tool for traders. It’s designed to identify significant gaps between the current price of a currency pair and its perceived fair value. These gaps are not just anomalies; they often act as magnets, attracting price movements towards them.

2. Understanding the Fair Value Gap Indicator

Definition:

The Fair Value Gap Indicator is a concept in Forex trading that zeroes in on areas on the chart where a noticeable discrepancy exists between the current market price of a currency pair and what is considered its fair value. This gap often signals potential future price movements.

How It Works:


The mechanics of the FVG Indicator are straightforward yet profound. It identifies points on the chart where the price has either surged upward or plummeted, leaving a noticeable gap. These gaps represent a disparity between the asset’s current market value and its perceived fair value, often triggered by sudden market shifts or reactions to news events.

Table Summary:

Feature Description
What It Finds Gaps between current prices and fair values
Purpose Identifies potential areas where price may gravitate
Trade Opportunities Signals where the price might return to fill the gap
Why It’s Useful Aids in predicting future price movements and targets
Market Insight Highlights market discrepancies due to sudden changes
Trading Strategy Effective for setting strategic take-profit levels

3. Practical Application in Trading

When traders identify these FVGs, they can strategically plan their trades around them. Since the price is likely to move back to these gaps to ‘fill’ them, these areas become crucial for determining entry or exit points in trading. The FVG Indicator doesn’t just identify a gap; it provides a roadmap for potential future price action.

Conclusion

The Fair Value GapS are more than just a tool; it’s a lens through which traders can view and interpret market dynamics. By understanding and utilizing this, traders can align themselves with more strategic, informed trading decisions, tapping into the potential of the Forex market.


This post is for educational purposes and should not be taken as financial advice. Always conduct your own research and consult with a financial advisor before making any investment decisions.
Disclaimer: This content is for educational purposes only and is not investment advice.

Interesting.

A new name for a gap!
And theory (which we all know the market doesn’t care about any theory) suggests that price will want to test if it can find value in a gap.

But I would go as far as calling a gap such a strong name like fair value gap.

At the end of the day at any given time so long as a buyer agrees with a seller on price there is an agreement on fair value. So you could argue that the market never strays away from fair value.

1 Like

I am sceptical too - firstly this strategy is based on impulse moves or impulse waves if you’re an Elliott fan. Gap is the wrong word. The suggestion that a forex exchange rate has a fair value - like Net Asset Value, which could be drawn from real assets like property, inventory etc. - is misleading.

To be convinced by this strategy I’d like to see some statistical evidence with multiple results across mulitple pairs.

FVG is a big part of the system ICT teaches, along with other factors to identify a setup. Like any strategy, they can fail, but in the end it all comes back down to price action, market structure and of course one of the most important components, money management.

Pair those last 3 components with any system and you’ll have a decent strategy.

1 Like

ICT fakes withdrawals and has blown accounts over and over.

I don’t know why people want to learn from him.

I’ve never really studied his stuff, but he has one hell of a following, it’s like a cult! If nothing else, he’s a good businessman.

He is a very good scammer. Not a businessman.

At the end of the day, if a trader is more profitable because of something ICT said or taught, does it matter that he’s blown accounts? The withdrawals are shady for sure, but if you’re learning, and the dude doesn’t take your money, who cares. That stuff isn’t a secret. There’s plenty of videos calling ICT a scam so it’s not like there’s only one side being presented.

Why not let the trader decide what works and doesn’t?

Shady? It was confirmed to be a fake.

Why would you want to learn from a fraud?

I would take the basic principles of his strategies. I think he has never claimed these are revolutionary so these are not his pronouncements. But nobody can fully trust anything else he says.

So many names for the same concept… FVG… imbalance. Impulsive candle. Inneficiency…

Call it whatever you want… indeed, specially in FX markets, this type of candles tend to get filled. However setting up a trading strategy based on this is another story…

First of all, the timing … The fill can come in the next candle, or it can come after 10-20 candles

Second, the depth… will price fill the gap, will it just touch it? Or will it fill about half of the gap?