This comprehensive session provided an in-depth explanation of fair value gaps (FVGs), their identification, and practical usage in trading strategies.
Topics included bullish and bearish FVGs, the importance of confluence, inverse fair value gaps, and when to disregard certain gaps based on trend continuation or reversal.
The discussion emphasized that FVGs are only one piece of a broader trading system, and combining them with other indicators (e.g., liquidity sweeps, break of structure, order blocks) is essential for effective trading decisions.
No new decisions or organizational actions were taken; the meeting was purely educational and instructional.
Action Items
None
Understanding Fair Value Gaps (FVGs) and Imbalances
A fair value gap is identified as a three-candle pattern: the first and third candles’ wicks do not overlap, creating a price “gap” where there was a lack of buy or sell orders.
Bullish FVGs indicate a lack of sell orders in an uptrend; bearish FVGs show a lack of buy orders in a downtrend.
The key to FVGs is not just spotting them but understanding why price is likely to move at or from the gap, providing confidence in trade entries.
The color of the first and third candles is irrelevant; only the direction of the middle/expansion candle matters.
No FVG exists if the wicks of the first and third candles overlap.
Application and Practical Use of Fair Value Gaps
FVGs should be combined with other confluences (trend bias, liquidity sweeps, break of structure) for high-probability trades.
Example process: identify a liquidity sweep, observe a break of structure, then look for an FVG and consider taking a trade on the retrace into the gap.
FVGs act as continuation confluences—best used early in a trend or during the first and second retracements.
The size of the FVG does not matter; both large and small gaps can be significant if they fit within the trading context.
Inverse Fair Value Gaps
An inverse FVG occurs when the price closes beyond a previously respected FVG, signaling potential trend reversal or a break in order flow.
Inverse FVGs are considered confirmation confluences, similar to a break of structure.
In a stacked scenario (multiple FVGs on top of each other within a move), the topmost (in a downtrend) or bottommost (in an uptrend) FVG must be invalidated before considering a true inverse signal.
Once an FVG is invalidated by price action, previous FVGs within that leg are disregarded in trade planning.
When to Disregard Fair Value Gaps and Understanding Balanced Price Action
Once price fills an FVG and makes a new high (in an uptrend) or low (in a downtrend), all FVGs in prior legs are considered “balanced” and can be ignored in subsequent analysis.
This rule applies to order blocks and breaker blocks as well: after a new trend extension and retracement, previous confluences within the completed leg lose their significance.
Only current-leg FVGs and relevant confluences should factor into ongoing strategy.
Applying FVGs and Inverse FVGs in Live Trading
Multiple live chart examples were given showing how to identify FVGs, when to anticipate a reaction, and how to recognize when previous FVGs are no longer relevant.
The process is to continuously analyze order flow by marking and tracking FVGs, watching for either confirmation (trend continuation) or invalidation (trend reversal via inverse FVG).
Decisions
No formal decisions were made; this meeting was dedicated to education on the topic.
Open Questions / Follow-Ups
Presenter mentioned future content on daily bias and the integration of FVGs into a comprehensive trading strategy.
Viewers are encouraged to watch prior videos on liquidity sweeps and stay tuned for upcoming materials on order flow and related trading confluences.