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Understanding Fair Value Gaps (FVG) - ICT Concepts
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Understanding Fair Value Gaps (FVG) - ICT Concepts

Introduction

The video is about fair value gaps, cities, busies, and fair value gap inversion.

What is a Fair Value Gap?

  • A three-candlestick pattern where the first candle low does not overlap with the third candle's high or where the first candle high does not overlap with the third candles low.
  • A fair value gap occurs when there is a gap between the first candle's low and the third candle's high or vice versa.

Examples of Fair Value Gaps

  • Example 1: There is a gap between this candle's low and this candle's high.
  • Example 2: This Candlestick high does not overlap with this Candlestick slow.

Cities and Busies

  • A city is a sell-side imbalance inefficiency, which means that sell-side was offered but buy-side wasn't so it is inefficient or bearish fair value Gap.
  • A busy is a buy-side imbalance inefficiency, which means that buy-side was offered but sell-side wasn't so it is inefficient or bullish fair value Gap.

Consequent Encroachment

  • Three things to look for within a fair value Gap are:
  • The start of the fair value cup.
  • The consequent encroachment or the 50% of the fair value Gap.
  • Where price completely fills the fair value Gap.

Fair Value Gap Inversion

  • When a Fair Value Gap fails or Price closes through it, this Fair Value Gap can then be used as support.

Understanding Fair Value Gap Inversion

In this section, the speaker explains how to identify fair value gap inversion and its significance in trading.

Identifying Fair Value Gap Inversion

  • Fair value gap inversion does not need to occur back-to-back.
  • Look for a close below the consequent encroachment.
  • A close below the fair value gap confirms fair value gap inversion.

Significance of Fair Value Gap Inversion

  • Price returns to old busy and uses it as resistance to go lower.
  • Price still respects the city as it closes out of it.
  • Consequent encroachment is used as support when price returns.

Volume Imbalance vs. Gap

This section explains the difference between volume imbalance and gap in trading.

Volume Imbalance

  • Volume imbalance is a gap between the closing and opening price of two candles with trading or overlap between high and low prices.

Gap

  • A gap has a complete absence of trading between two candles.

Conclusion

The speaker provides an overview of how to identify fair value gap inversion and its significance in trading. They also explain the difference between volume imbalance and gap.

Video description

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