Invalidation of Fair Value Gaps and Trade Setups

Introduction

• Focus on invalidations of fair value gaps (FVGs).
• Discuss how invalidations can invalidate or validate trade ideas.
• Mention of a new concept similar to inverse FVG, but the lecturer does not fully support it.
• Overall, the lecture is built on practical examples and less on theoretical constructs.

Key Concepts

Fair Value Gaps (FVG)

• Definition: Areas where there is a price gap due to market imbalances.
• Formation is typically a signal for a potential trade.

Invalidation of FVGs

• Occurs when price closes above or below the FVG, nullifying it as a reliable trade entry point.
• Two key uses:
  1. Invalidation of trade ideas (closure above/below the FVG).
  2. Confluence for new trade setups.

Invalidation as Confluence

• If a bearish FVG is invalidated, this could serve as a bullish confluence.
• Can be used to either confirm an entry or support an existing trade idea.
• Inverse FVG is not a mainstream concept but can be seen as additional validation.
  • Used to confirm that market conditions have shifted against the direction initially suggested by the FVG.

Practical Examples

Example 1

• Move Down Example
  • Sweep of liquidity.
  • Break of structure.
  • Formation of a downward FVG.
  • FVG gets invalidated by closure above it, indicating invalid trade setup.

Example 2

• Bullish Bias Example
  • Sweep of hourly lows.
  • Break of structure (bullish bias).
  • Bearish FVG appears but gets invalidated, serving as a bullish confluence.
  • Now, can use invalidated bearish FVG to support bullish trade idea.
  • Place stops under the invalidated bearish FVG.

Counterexamples and Limitations

• Invalidated FVG alone is not enough; need additional confirmations like equilibrium, order blocks, and liquidity sweeps.
  • Example given where bearish setup remains valid despite invalidation because other confluences support the bearish trend.

Additional Tips and Insights

• Combining Confluences: Always combine invalidated FVGs with other signals like liquidity sweeps and breaks of structure.
• Time Frames and Analysis: Look across different time frames (e.g., 1-minute, 5-minute, 15-minute) for stronger indications and confluences.
• Practical Experiences: Importance of real-time observation, including market sessions and adjustments based on confluences.

Summary

• Invalidations of FVGs offer a nuanced way to either nullify trade setups or support new ones through added confluences.
• Practical use in real-time trading sessions is vital for mastering the concepts.
• Balance between theoretical understanding and application in live markets crucial for effective trading.

---

Note: Extraneous elements like the lecturer's side comments or interruptions have been omitted as they do not pertain to the core lecture content.