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.
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.
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.
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?
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?
Yea I’ve noticed this. It’s so random it’s hard to understand what should be done. I’ve just sat and watched the chart and I guess just wait for a bounce or follow through or some reaction to the FVG levels. So maybe not the holy Grail people make it out to be?
I haven’t checked out FVG’s but I find in general no price levels are consistently reliable in marking where price will pause or stop or reverse. Obviously such things do happen but I have a feeling if you picked any random price which is within 10% more or 10% less of where it is today, sooner or later that price level will look like significant. And at that point you will look like a hero. Or at least a guru.
I do see FVGs work better on higher time frames, but even then it’s not really consistent.
I gave this a watch. Still working on focusing just on this to see if there’s any better trading performance. Might be interesting to you. These guys have been trading for 10+ years so I give them more time than most Youtubers. Bit of a clickbait title to the video.
How has your experience been with utilizing the Fair Value Gap (FVG) Indicator in your Forex trading strategy? Have you found it to be a reliable tool for identifying potential trade opportunities and guiding your entry or exit points?
I’m still on the fence with these. Sometimes they work, other times they don’t. I’m trying to work out if higher timeframe FVG maybe work when you look at them at lower timeframes.
But I switched my trading more to look at market structure and breaks of structure (BOS). Same thing, find the higher timeframe BOS and then go down to lower timeframes and watch price brak below, pullback to retest and then continue with trend. That’s been way more consistent for me.
