Summary
Highlights
The speaker, despite being sleep-deprived, is committed to uploading a daily video. This session is Fair Value Gaps Part 2, focusing on identifying them. A quick recap explains that fair value gaps, liquidity voids, or imbalances are areas with a lack of liquidity, meaning no resting orders in the opposite direction of price movement. Price tends to retrace into these areas and react, providing opportunities for trade continuations, not reversals.
Fair value gaps are identified using a three-candle pattern. For a bullish fair value gap, there's a gap between the top wick of the first candle and the bottom wick of the third candle, with the middle candle creating the imbalance. This gap represents an area with no resistance or resting orders. Examples on charts are shown to illustrate bullish and bearish fair value gaps, demonstrating how price often fills these voids before continuing in the trend direction.
While fair value gaps are easy to spot, they are not always reliable on their own. It's crucial to wait for a reaction or scale down to a lower time frame for a break in structure or a market structure shift as confirmation before entering a trade. The homework for viewers is to identify 10 fair value gaps on their chosen trading pair and to also learn to distinguish between real and invalid fair value gaps.