How to Trade Fair Value Gaps (FVG Strategy Explained Simply)

fair value gap, or as it is known online and one of the most discussed subjects in the last, I don't know, year. Fair value gap is FVG. You can find tons of material about this, what so many call secret, and the answer is it's absolutely nonsense because it's not secret at all. It is a very, very, very, very basic, simple, known concept of following 3 elements— candle patterns, waves, etc., etc.— that lead for trading opportunities. So in this video, I want to break down this very, very widely spoken, covered concept called the FVG, the Fair Value Gap. Uh, and also talk about different approaches which could improve your trading accuracy and results if you use these concepts. So let's begin. So first of all, if you are new to this channel and don't know who I am, my name is Vladimir. I'm internationally certified financial technician. So when I cover and explain little things, you can trust it. I have a little knowledge and enough experience with me trading over 2 decades. And that's why I decided to record this video. First of all, you guys, the followers, asked me to create video covering this concept, this subject, Because it is everywhere. You go on the internet and it is every single where and everyone promises to show you the absolute secret behind the FVG, behind this concept. Now, here is a very interesting truth about the evolution of trading education online, which nowadays it's absolutely crazy. And I have to admit, there are guys that are doing it online Very, very, very, very impressive. Much more impressive than I am doing in my kind of videos. They do it with a beautiful additional, beautiful edits, beautiful, uh, bombastic things behind them, effects and so on and so on. And really well done. But when it comes to trading, let's, let's talk about the real concept. What works, what not, what's important to pay attention to, and how to improve your accuracy. So the FVG Is that a good concept? The answer is absolutely yes. It comes from a very logical approach. Fair value gap. Is it a secret? Absolutely not. And don't believe anyone who tells you that online. Is that the new Holy Grail? Absolutely not. Not even close to be Holy Grail. And in fact, if done not properly, it will lead you to do more losses than winners, which will end up in frustration and most likely for you, Keep jumping to the next thing, the next strategy, the next indicators, and so on and so on. So very important, like with anything in life, especially when it comes to trading where money is involved, is to take the information, even my information which I share with you here, and do your own research. Okay, put it in test, put it in reality before you actually use that. So don't trust anyone because he or she promised you the secret or anything like that. Take that, use that, make your own research, see if it works for you and how you can actually twist it in a way that it works for you and performs for you the best way. So in this video, I will break down these little tips, advantage, uh, things that could, could, could give you this very advantage, uh, when you trade this, uh, concept. So, um, Fair value gap, what it is all about. This is a very simple method, as you can see on this very image, which has 3 candles following in the same direction, bullish or bearish, with a gap between the first and the second candle. What do I mean by gap? Look at the first candle, for example. Let's take a look on the bullish side. So this is the first candle. Small candle with this spike. Then we got a massive candle, which is much bigger than the first and the last candle. And then we had the third candle in the same direction. They all the three candles create higher highs, higher lows. The gap is here. The what's called FVG, the fair value gap. The high of the first candle through the low of the last candle. Why there is a gap? Because basically the buyers took a major control control through that, and there is a gap between the buyer. And the sellers. The buyers are in full control. This is why it's called the fair value gap. So the idea is simple: at some point, this gap should be closed, like majority of gaps in trading, and from there, the buyers who actually, um, initially took the control would eventually push the prices further to the upside. This is the logic behind it. For the bearish one, same story. Small candle followed by huge candle to the downside. Another bearish candle. They all create lower highs, lower lows, and the gap is in between the low of the first candle through the high of the last candle. This is the fair value gap or the FVG. This is called imbalance zone between the sellers and buyers because the sellers took the major control here. So the assumption here gonna see some retest of this zone before sellers will continue further down. So far it looks fantastic and looks to many of the first-time viewers, wow, what a kind of— what a concept, it must be making millions. But it's not a magical concept, definitely not the one that will make you millions unless you use that really, really, really well, like anything else in, in in trading. It has to be combined with common sense, with proven methods like supply-demand, support-resistances, trend line, and key levels, which I'll show here, and also some little tricks that I find very, very helpful, which I'll show in this video. So as I mentioned before, this concept is no different from other concepts based on 3 waves candles, highs, lows, and so on. So what other concept we have in the same format? Not to go too far, the Elliott Waves, the classical Elliott Waves, which are built with 3 impulsive waves. First wave followed by correction, second wave which is between the point 2 and 3— this is the biggest wave, the strongest wave, the longest one— correction, and then the final wave. And the idea is very simple. Three waves where the middle one is the biggest one, the longest one, similar to what we saw before with the FVG. This one, right? Absolutely the same concept. Three in that case candles, but where the middle one is the biggest one, and it's no different to other concepts like three bullish soldiers or three bearish soldiers, which are three following bullish or bearish candles. So this the idea of three following. Elements, candles, waves, swings. It's not new, it's not different. It is— it was there since forever. But the thing is that somehow the Forex world, and especially the YouTubers like myself, just the ones who do the job better than myself, and Instagrammers and all the new generation that use the social media and some bombastic effect. What they do is they create concepts. If you remember years ago, there was a huge hype and talk about the harmonic patterns. Everyone was talking about them, everyone was using them. But when you dig deep inside it, you understand that it's all based on Fibonacci expansion. So when you learn a little bit more How Fibonacci expansion work, what the levels do, where does the market go when specific levels are created or retested, then you understand that there is no magic behind it. And then there was the SMC and other concept, CHOCH, BOC, whatever. There are so many beautiful bombastic names that promise you that this is the only thing you need in trading and this is the only strategy you need in trading. However, As cool as the tools are, if they are misused, they would create more damage than benefits. So, uh, let's take a look then. What do we do and how do we do with the fair value gap? So the idea is simple. Once you recognize the pattern of 3 following candles to the upside or to the downside, when the middle candle is the biggest one, what you do is you connect the high of the first candle through the low of the last candle in a bullish fair value gap, and in between, this is your zone for trading. The next step is to look for the market to retrace and start making some bullish rejection, which means candles that start to rise again. And once that happens, you would be looking for the buy opportunities. Now, there are tons of different approaches there. When you enter the buy here, you protect below the fair value, you are aiming to whatever next resistance, next highs, and so on and so on. That's less critical at that point. So I want to show you directly examples on charts, what to do, what try not to do. And mostly, mostly important, understand that that's not the, uh, this strategy that will guarantee you results or profits. It's not the strategy that will make you Billions and billions of dollars, and it's definitely not a secret. Okay, like anything else, it has to be used right. So what does that mean? Right, let's take a look on the charts. But before the charts, I would like to remind you or to announce if you watch us for the first time and if you see this channel for the first time. Recently, we teamed up with one of the biggest brokers online in this industry, AvaTrade. Which means for you what? If you trade with AvaTrade, you can get unlimited access to Home Trader Club. What do you get inside? Complete trading courses for beginners, for advanced, comprehensive media zone full of webinars and courses, VIP price action divergences, trading strategies, risk management, and so, so, so much more. Get your access to all of our trades in our trading journal and so much more, including the access to our trade copier. So the link is below this video in the description. And now let's talk about the FVG examples and see what's good, what's not bad. So the FVG would have value when it is used with other important, uh, technical analysis concepts and combined together. What am I talking about? Support resistances, breakouts of Trending structures, patterns, trend lines, last swing high, swing lows, divergences, and price flips, change of directions. When this is combined together, your probability to end up as a winner would increase. The FVG mostly widely spread and used on the lower time frame simply because this is where they call the quick reaction is and so on. However, in reality could be applied to any time frame. When there is a fair value gap, it's similar to five minutes, fifteen minutes, and yes, one hour, four hour, and daily. If there is a gap and there is a value, then the buyers and the sellers would respect that regardless of the time frames. Believe it or not. So what do we have in our case here? So what happens here? We got the break above this range, and the market started to recreate these highs. But look more over what happens here. This high is broken. This high is broken. This range is broken, and this is exactly where the fair value comes in play. Look at this bullish candle, this bullish candle. The next candle is bearish. However, it does create higher high, higher lows, and it is significantly smaller than the green candle. So you take the high of the first candle, you take the low of the last candle, and this is where your gap of value is. When the market comes to retest the zone, what you will want to see is from candles that drop to the downside. You want to see candles then climb back. When that happens, this is your green light to go. In our case, it happens to be right here when the candle starts to rally, or here after another gap during the weekend when the market simply kicks to the upside from there. That is a great sign when the fair value holds it, and when you go in, you can protect below the biggest candle of the fair gap. Of course, you can also protect below the first candle and even below the recent high and low when it comes to swing highs and lows. However, the bigger your protection is, the smaller your risk-reward ratio would be for that trade. So this is important one. Let's take a look at another example. Another example comes right here. So what do we have here and why this is very beautiful one? So after a beautiful climb with a sequence of higher highs, higher lows. Look, the interesting part happened here. When you connect the highs, see what happens? The market goes above that just to drop under it again. This is kind of a false breakout or a fake sign here, which creates for us 3 following candles to the downside. So when you connect the low of the first candle with the high of the last candle in a bearish fair value gap, Inside you get the zone which once filled should provide good opportunities. And as soon as you get inside and you start to see the candles that actually make lower highs, lower lows, it opens up the doors for a sell. But there are also cases that you would simply want to avoid, and here are these things that you would want to avoid when trading. First of all, when you encounter a higher time frame Support resistance on the FVG, or when you run into some overbought oversold conditions. For example, look what happens here on the euro dollar four hour chart. It breaks to the upside and making a beautiful bullish candle, much bigger bullish candle, smaller candle. So that's a great fair value gap zone. So theoretically speaking, drop inside should lead for further rally. However. Look what happens here. This is a resistance from the higher time frame. We run— look at the RSI here, it is on 80. That's a very strong overbought zone. So when you encounter that and the price enters the value gap, don't rush to buy. Very likely this is a strong ceiling that would prevent the buyers to actually do that. So when you are following the fair value gap, you want to do it in the initial waves. For example, if that was the move down which flips and makes the correction, this is where you would be looking to trade it. Okay, when it comes after a significant rally that runs into resistance from higher time frames or overbought, oversold conditions, that's where you would want to be careful. Another important thing, tip from my point of view to try to avoid is when you have FVGs but without any context or any support from anything. What do I mean by that? And even contradicting conditions. So look what happens here in the gold, for example, right at that point. We created here 3 candles that make lower highs, lower lows, which means Once you got the first low and the last candle high retested, that's a fair value gap. However, look at these bounce happening at that moment. That happens from where? Broken resistance that now acts as support. The market is holding that. So this fair value gap has a very, very, very serious mark telling that the chances for that to actually work are smaller. You better be careful with these kind of situations. And now I want to share one of my favorite methods when it comes to the FVG, and not only, but FVG mainly. So when you run into bearish divergence, for example, on same or even higher time frames, and the market makes, for example, higher highs on the chart versus lower highs on the indicators, and RSI also overbought, the chances we will see the move down are higher. No guarantees, but the chances are higher. And looking for bearish FVGs here at the beginning of the move is exactly what we would want to do. So in our case here, in this example, we run into bearish divergence with RSI overbought, 3 bearish candles making lower highs, lower lows, first candle low, last candle high. And you got the fair value gap. This is where you should be looking for your trading opportunities. Aiming to where? Aiming to the next important swing lows, important demand levels, and of course the next lows on the horizon. And that's what usually creates great risk-reward trading opportunities for you. Here is another example. This is the euro-dollar 15 minutes. As I said before, 5 and 15 minutes are used Uh, very widely, very commonly. Um, but that's not the only time frames, of course, that work. But look what happens here, and this is the following concept to the divergences. It's when the market flips the structure. Well, after sequences of lower highs, lower lows, between the lows there was a condition of a bullish divergence— lower lows on the chart, higher lows on the moving average of the MACD and RSI as well. And that's a great sign that the buyers are likely to step in. And as soon as that high is broken, look how it is broken— with a massive bullish candle. This massive bullish candle creates the FVG. One little green candle, huge green candle, and another candle that makes higher highs, higher lows. So the high of this green candle with the low of the red candle, which still made higher highs, higher lows, create for you the FVG, which means as long as this area holds, we would want to see the price rejecting inside and pushes that to the upside to the next important resistance, uh, demand level, ideally from the higher time frames. And here is another example how this concept comes together after divergences, after a sequence of higher highs, higher lows When the market makes higher highs, MACD moving average makes lower highs, RSI makes lower highs. That's the place where you would want to look for the FVG. 3 following candles to the downside making lower highs, lower lows, with the center mid candle the biggest one, the longest one. So the low of the first candle versus the high of the last candle, and this is your FVG. As soon as the market comes to there, that's your place to look for the sell opportunities, aiming at least to the previous swing low, and ideally from the higher time frames. This is where your best of the opportunities would be together when you take the concept of the fair value gap, but after it comes with a proven technical concept from the other methods, concepts of the technical analysis. Couple of more examples. Similar scenario happens here. 3 waves to the upside, higher highs on the chart versus lower highs on the moving average of the MACD, with RSI almost on 80. And look what follows after that— 3 bearish candles. First small one, second biggest one, third is big enough but smaller than the second one, which means fair value gap. And as soon as we are there, that's our place to look for the sells and to retest the next important lows on the chart. And another example, and this one is from the higher time frames, similar story. After sequences of higher highs, higher lows, we got a condition of bearish divergence— higher highs on the chart versus lower highs on the moving average of the MACD. And price flips. Fantastic! But moreover, after it flips, it also makes lower highs, lower lows after breaking a rising trend line. So now you have a trend line, a break of this channel, which retrace to retest this zone should provide you the aha moment to look for the trading opportunities. Look at these candles here. Red candle, massive red candle, another red candle that creates for us— guess what? FVG, fair value gap. And as soon as we are there, that's our time to look for dropping candles that would give us the green light to go for the sell. Aiming to where? Aiming to the next important lows on the way. So that's it for this video, and I hope this video brings some value to you, um, explaining this concept. It's a fantastic concept, but like many other concepts, if used correctly, uh, in combination with things that actually work. So I wanted to give you the FVG concept fully explained, the fair value concept, um, fair value gap concept fully explained, what it is, um, why it's not the secret weapon you have to have in your trading, but why it is definitely a good one to have, uh, as combined with your trading strategies. And wanted to give you my personal, uh, uh, suggestions where these fair value gaps should be applied. If there are subjects you would like me to cover in the future videos, let Let me know in the comment section if you have any questions. Of course, don't hesitate to ask. Thank you for watching. I wish you and yours all the very best. Good trading. And I want to take the opportunity and to invite you to our trading family, the Home Trader Club, with the link below this video. Um, we can also join us absolutely free with unlimited access with our partnership with AvaTrade. Again, the link in the description. Best to you and yours. I'll see you soon with more. Good trading. Bye for now.