Fair Value Gaps and Market Structures
Introduction
- Focus: Review and application of Fair Value Gaps (FVG)
- Recap of previous sections
Fair Value Gaps (FVG)
- Purpose: Highlight gaps in value and how to leverage them
- Market Reactions: Understanding why the market reacts to FVGs
- Spotting FVGs: Techniques for identifying FVGs
Today's Trade Example
- S&P 500 Trade: Key Steps
- Identified a small uptrend
- Observed break of structure on the 15-minute chart
- Identified a fair value gap (FVG)
- Entry and execution based on market open and key confirmations
- Key Concept: Multiple confirmations before entry (break of structure, trend, FVG)
Detailed Strategy for Using FVGs
- Step-by-step Process:
- Identify trend and structure breaks
- Look for FVGs in the higher time frame
- Scale down to lower time frames for precise entries
- Confirm with further structural breaks in lower time frames
- Example: S&P 500 trade breakdown with multiple confirmations
Applying the Concept to Different Markets
- GBP/JPY Example
- Identified high timeframe highs
- Observed liquidity sweep and break of structure on the 15-minute chart
- Identified multiple FVGs
- Executed based on smaller timeframe confirmations
- GBP/USD Example
- Daily break of structure observed
- Identified FVGs and retracement levels
- Used lower timeframe confirmations for precise entries
Best Practices
- Use FVGs for Retracements:
- Not ideal for direct entries but great for spotting retracements
- Confirm with breaks of structure and trend shifts in smaller time frames
- Example Trade Analysis
- Identified structure breaks on various time frames
- Analyzed specific liquidity areas for targets
- Used FVGs to anticipate retracements and entries
Moving Forward
- Upcoming Topics: Order Blocks
- Part 1: Explanation
- Part 2: Spotting Order Blocks
- Part 3: Integrating with other concepts
- Focus: Continue blending psychological and trading knowledge
Conclusion
- Homework: Review previous sections on liquidity sweeps, break of structure, and FVGs
- Next Lecture: Order Blocks and their strategic use in trading
Overall, the lecture emphasized practical applications of FVGs, combining them with other market structure concepts to create trading strategies. The next focus will be on order blocks, leading towards building a complete trading strategy.