๐13 Hello, fellow traders! Together, we continue our learning journey to establish the principles of professional, systematic trading. Today, we turn to a precise technical concept that explains how price moves at tremendous speed in one direction, and how professional traders use these gaps as liquidity magnets and ideal entry points: Fair Value Gaps (FVG).
---
๐ฏ Rule #13: โFair Value Gaps (FVGs) are a magnet for future price action... prices tend to fill the voidโ
๐ก The concept in simple terms:
When a sudden, violent price surge occurs (either upward or downward), the market doesnโt have enough time for buyers and sellers to trade in a balanced way. This results in a โprice voidโ or imbalance on the chart.
This void is known as a Fair Value Gap (FVG). Price treats these areas like a โdebtโ that needs to be repaid, and often returns to fill and cover them completely before continuing its true direction.
---
๐ How to identify and trade FVGs like a pro?
1๏ธโฃ How does a Fair Value Gap (FVG) form?
โข It forms between three consecutive candles during a strong move:
- The first candle: the starting candle.
- The second candle: a very long candle (that forcefully pushes through the market).
- The third candle: the candle that follows.
โข The gap occurs when there is a โvoidโ between the wick of the first candle and the wick of the third candle, so they never overlap.
2๏ธโฃ How can you use it in spot trading?
โข When price rises, leaving a bullish FVG behind, wait for price to retrace calmly and fill the gap.
โข Set your spot entry at the midpoint of the gap (50% FVG) or at its beginning.
โข Place your stop-loss order just below the first candle that formed the gap.
3๏ธโฃ A practical plan to protect your trades:
โข Donโt enter randomly just because you see a gap; make sure it aligns with the overall market direction or is supported by a strong demand zone.
โข Gaps that form on higher timeframes (such as the 4-hour and daily charts) are much stronger and more reliable than those on minute timeframes.
---
โ๏ธ The rule in a nutshell:
โMarkets hate a void just as much as nature does. Identify FVGs on your chart and use them as clear targets or precise entry points to secure the best investment prices.โ
---
๐ฌ Tell us in the comments:
Do you rely on tracking Fair Value Gaps to analyze price action, or do you focus only on traditional support and resistance?
#SpotTrading #cryptotrading #FairValueGaps #TechnicalAnalysis #ุงููุนูุงุน_1
