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An Introduction To FVG

The document discusses fair value gaps, which are gaps in price caused by aggressive moves that leave typical trading ranges. A fair value gap is identified by a 3 candlestick pattern where the first and third candlesticks do not overlap. Fair value gaps indicate the price will seek to return to balance, and can be used as signals to enter long or short positions depending on the trend of higher timeframes. The document recommends backtesting different higher and lower timeframe combinations before using fair value gaps in trading.

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Iancu Jianu
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497 views3 pages

An Introduction To FVG

The document discusses fair value gaps, which are gaps in price caused by aggressive moves that leave typical trading ranges. A fair value gap is identified by a 3 candlestick pattern where the first and third candlesticks do not overlap. Fair value gaps indicate the price will seek to return to balance, and can be used as signals to enter long or short positions depending on the trend of higher timeframes. The document recommends backtesting different higher and lower timeframe combinations before using fair value gaps in trading.

Uploaded by

Iancu Jianu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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An introduction to Fair Value Gaps.

What is it? How do you identify it? How do you use it?
Let's dive in.

What is a Fair Value Gap?


1️⃣ It is an imbalance in price.
2️⃣ It indicates aggressiveness - created when price leaves an range quickly.
3️⃣ Price will seek to return to the FVG to rebalance and pick up unfilled orders.

How do you identify a Fair Value Gap?


1️⃣ It is a 3-candle pattern.
2️⃣ It is identified as the area where the wicks of the first and third candle DON'T overlap.
3️⃣ It can be found on any timeframe.

How do you use a Fair Value Gap?


1️⃣If the higher time frame is bullish, they are expected to hold as support - an entry to go long.
2️⃣ If the higher time frame is bearish, they are expected to act as resistance - an entry to go short.

I highly suggest you spend some time back testing Fair Value Gaps before using them in your own
trading.
The best Higher and Lower Timeframe combinations.

Weekly -> 1 hour


Daily -> 15 min
Hourly -> 5 min
15 min -> 1 min

The setups come from the HTF, but the executions take place on the LTF.

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