Lecture on Fair Value Gaps and Imbalances

Introduction

• Purpose: Simplify the concept of fair value gaps and imbalances for better trading comprehension.
• Usage: Regularly used in trade strategies and recaps.
• Scope: Covers fair value gaps, imbalances, new day/week opening gaps, candle gaps, and inverse fair value gaps.

Understanding Imbalances

• Definition: Price is not balanced which means the market will likely seek to balance it out by filling the price action gap.
• Types of Imbalances:
  • Fair value gaps
  • Candle gaps
  • New day opening gaps
  • New week opening gaps
  • Inverse fair value gaps

Fair Value Gaps

• Structure: A three candlestick pattern.
  • Bearish Fair Value Gap: Gap where the first candle's wick doesn't cover the third candle's wick.
  • Bullish Fair Value Gap: Opposite to bearish, with a gap that indicates a lack of sell orders.
• Purpose: Price aims to fill in the imbalance to allow market continuation.
• Example: On different timeframes, such as 4hr, daily, 15 min, etc.

Inverse Fair Value Gaps

• Definition: Occurs when a fair value gap is invalidated, often used as confirmation rather than a confluence.
• Usage: To detect changes in market trend direction.
• Example: Used similarly to breaks of structure for confirmation.

New Day/Week Opening Gaps

• New Week Opening Gap:
  • Definition: Imbalance evident when a new weekly session opens at a different level than it closed.
  • Example: Price often seeks to fill these gaps immediately.
• New Day Opening Gap:
  • Similar Concept: As weekly gaps but on a daily timeframe.

Candle Gaps

• Definition: Similar to new day/week gaps but on smaller timeframes.
• Purpose: Used to understand price movement rather than for direct trading.
• Example: Often observed on minute charts.

Key Takeaways

• Identifying and understanding various imbalances can significantly enhance trading strategies.
• Context and bias are crucial for effective trading decisions.
• Various imbalances provide insights into market behavior and potential trend reversals or continuations.

Conclusion

• Emphasis on understanding imbalances completely for better trading outcomes.
• Encouragement to further explore free resources such as boot camps or trading transformation videos for deeper learning.

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Note: The lecture encourages watching additional resources for comprehensive understanding and practical application.