00:00:00
fair value gaps are a big reason I've
00:00:02
made Seven figures from Trading before I
00:00:04
learned them I was a broke and
00:00:05
struggling Trader for nearly a decade
00:00:08
blowing account after account because I
00:00:10
didn't trust any trading setup I've now
00:00:12
been a full-time Trader for the past 3
00:00:14
years and have withdrawn over a million
00:00:17
dollar across 200 plus payouts and
00:00:19
recently I've had multiple $50,000 days
00:00:22
using mainly fair value gaps in this
00:00:24
video I'm going to show you exactly how
00:00:26
they work and why they're one of the
00:00:27
most powerful Concepts so grab your
00:00:29
notebook and let's get right into it
00:00:31
okay let's dive into one of my favorite
00:00:33
Concepts fair value
00:00:35
gaps now let's go through a simple
00:00:37
definition of
00:00:39
them essentially they are the empty
00:00:42
space that's created when a price makes
00:00:44
a sudden move so it leaves an imbalance
00:00:46
in price and why is this so important
00:00:50
well when we break down markets and how
00:00:52
we find opportunity in the markets to
00:00:55
make money price needs to be out of
00:00:57
balance if the markets are in balance
00:01:00
mons essentially what you get is just a
00:01:02
trading range and it's not until the
00:01:05
market moves
00:01:07
to levels that are out of balance that
00:01:10
we get
00:01:11
opportunities so when the market is
00:01:13
trading at lows right it's out of
00:01:16
balance from equilibrium so just imagine
00:01:19
that this is equilibrium so we have 50%
00:01:22
of a specific
00:01:24
range then we have discount and
00:01:28
premium okay so the only way that the
00:01:31
markets provide opportunity for us as
00:01:34
traders to make
00:01:35
money is when they're out of balance and
00:01:38
that's basically why fair value gaps are
00:01:41
so powerful because it's showing you an
00:01:44
imbalance between buyers and sellers so
00:01:46
I know there's a lot of conflicting
00:01:48
information out there as far as you know
00:01:50
how markets operate is it run by an
00:01:52
algorithm is it not and my question to
00:01:54
you is does that really matter does it
00:01:58
really matter how the markets operate on
00:02:01
the back end because even if you did
00:02:04
know it's still not going to have an
00:02:06
effect on the trade that you're placing
00:02:08
right now so the probability is all in
00:02:11
your hands okay how are you managing
00:02:13
that specific
00:02:15
position and when I try to visualize the
00:02:18
markets and this is just how I've been
00:02:20
able to you know break things down in a
00:02:23
digestible fashion where I can
00:02:24
understand it and it makes sense to me
00:02:27
is a fair value Gap really just shows me
00:02:29
an imbalance between buyers and sellers
00:02:31
all right and that's really what we need
00:02:33
to make money so when we talk about fair
00:02:36
value gaps you know what is a fair value
00:02:38
Gap a fair value Gap is a three candle
00:02:41
pattern right where you have one candle
00:02:44
two candles and three candles but as you
00:02:48
guys can see this third candle does not
00:02:51
fill in the body of this candle okay so
00:02:55
as part of that simple definition right
00:02:56
it makes a sudden move leaving an
00:02:58
imbalance so this is creating what a buy
00:03:01
side imbalance and the way that I view
00:03:03
these is that buyers are in control of
00:03:05
these markets that's all you need to
00:03:08
know I don't really care if there's an
00:03:10
algorithm driving or not pay attention
00:03:13
to these patterns enough and watch them
00:03:15
pan out and they will help your trade
00:03:17
they will Aid in your trading they will
00:03:18
help you determine you know which
00:03:20
direction is order flow really going is
00:03:22
it going higher is it going lower and
00:03:25
when these levels get inverted right now
00:03:27
we have possible opportunities to go the
00:03:28
other direction right because now all of
00:03:30
a sudden this buy side imbalance is
00:03:32
being violated to the
00:03:34
downside that's really all we need to
00:03:36
know what side is the market imbalance
00:03:39
towards are there more buyers or are
00:03:41
there more
00:03:45
sellers so when the markets get
00:03:47
rebalanced right think about this all
00:03:50
it's really doing is offering price at
00:03:54
these levels where where we created an
00:03:56
imbalance so I've read a numerous
00:04:00
amounts of books and I've read a bunch
00:04:02
of articles on this and you know from
00:04:05
what I've gathered at least right this
00:04:06
is my experience my knowledge of the
00:04:09
markets these large funds and these
00:04:11
large institutions when they Place
00:04:13
orders they're not being able to get
00:04:16
filled at that same price let's say if
00:04:17
they have I don't know a very massive
00:04:20
order let's say they want to buy $100
00:04:21
million of something or maybe even more
00:04:24
maybe $250 million or something they
00:04:27
can't get the same fill price because
00:04:28
these markets move without them so if
00:04:31
they get filled on say 100 million of it
00:04:35
and the other 150 million needs to get
00:04:36
filled well what happens is when that
00:04:39
order goes through for 100 million it
00:04:42
causes prices to you know it causes
00:04:44
these prices to jump and when it
00:04:48
retraces now they're able to fill the
00:04:50
second part of the order right okay this
00:04:53
is how I uh you know internalized it
00:04:56
this is basically how I visualize the
00:04:58
markets or try and interpret the context
00:05:01
of the markets right cuz there's
00:05:02
elephants in the room that are trying to
00:05:04
buy up a specific asset and they're not
00:05:06
going to be able to get filled at the
00:05:08
correct prices so let's say that this is
00:05:11
you know I don't know a
00:05:13
dollar so this price right here is a
00:05:16
dollar okay so they could filled on
00:05:19
their dollar but now all of a sudden
00:05:21
jumps to
00:05:23
here so instead of it being $1 now it's
00:05:26
a
00:05:27
$125 but they still want get their the
00:05:30
rest of their order filled out a dollar
00:05:32
but when it returns to a dollar now they
00:05:35
can fill the other 100 million or the
00:05:37
other 150 million
00:05:39
okay and vice versa right if they're
00:05:42
trying to sell an asset and offload an
00:05:44
asset you have this sell sign in balance
00:05:47
as the price rebalances that level
00:05:50
they're allowed to sell more of it at
00:05:52
the price that they want to sell it at
00:05:55
okay this is our typical reaction that
00:05:58
we're expecting from a fair value Gap
00:06:00
fill now it's not going to be picture
00:06:02
perfect like this every single time like
00:06:04
you're not going to get this old high
00:06:06
and then you're not going to get this
00:06:07
low that pretty much lines up with that
00:06:10
sometimes it's you know perfect other
00:06:13
times it's not so perfect and that's
00:06:15
just part of markets there's a little
00:06:16
bit of Randomness to this okay so now
00:06:18
that we understand what a fair value Gap
00:06:20
is let me walk you through three
00:06:23
essential tips to actually trading them
00:06:25
profitably but first fair value gaps are
00:06:28
just one of the many trading setups in
00:06:30
my Arsenal and while they're great on
00:06:32
their own when I can combine it with two
00:06:34
to three other Concepts it really takes
00:06:36
my trading to a whole another level so
00:06:38
if you want to learn all of the trade
00:06:39
setups I use in depth with examples of
00:06:42
entries stop-loss placements Etc make
00:06:45
sure you download My ultimate guide to
00:06:46
trading executions and I'll leave that
00:06:48
link in the description okay so
00:06:50
essential tips tip number one when
00:06:53
bullish fair value gaps presented in
00:06:56
discount are much higher probability and
00:06:58
vice versa so let's go through a couple
00:07:00
examples of what I mean when we're
00:07:02
looking for fair value gaps this is
00:07:05
really where you have to implement
00:07:06
another concept uh and it's basic
00:07:08
trading ranges so when we're trying to
00:07:10
determine trading ranges all you're
00:07:12
trying to do is find a specific range
00:07:14
that has a swing low and swing high and
00:07:17
use a Fibonacci tool okay so when we're
00:07:19
drawing that out right as I mentioned we
00:07:22
need markets to be out of balance and
00:07:24
when they're in Balance we're not really
00:07:26
getting uh the opportunity that we want
00:07:29
so when we're hunting fair value gaps
00:07:31
when we're bullish the fair value Gap
00:07:33
that resides in discount is much more
00:07:36
powerful than the ones that reside in
00:07:38
premium so as you guys can see here in
00:07:40
this example we had a much larger fair
00:07:43
value Gap that's resting in discount
00:07:46
based on this specific swing so we have
00:07:48
the swing low swing High these bullish
00:07:51
fair value gaps in here are low
00:07:54
probability okay so if we have an
00:07:56
overall uh bullish bias on a specific
00:07:59
Market Market the fair value gaps that
00:08:01
rest in discount are much more important
00:08:04
and yeah you could probably say oh well
00:08:06
there's a swing low here and there's a
00:08:07
swing High here so isn't this
00:08:09
technically resting in a discount yeah
00:08:11
but this is not really an obvious swing
00:08:13
Point okay so when I zoom out of this
00:08:17
market right what I'm looking for is you
00:08:19
know visible swing points this here is
00:08:22
basically just a straight line higher
00:08:24
okay this is not really a pullback this
00:08:26
is not a pullback that's visible okay
00:08:29
okay so when I'm looking for swing
00:08:30
points I need something that's visible
00:08:32
that you know if I turn my Candlestick
00:08:34
chart to a line chart it needs to show
00:08:36
me market structure and if you turn this
00:08:38
Candlestick chart to a line chart you
00:08:41
probably wouldn't get the same detail
00:08:42
it'd be like this it would look like
00:08:45
this and then like this okay so this is
00:08:48
not a real swing point to me guys when
00:08:50
you're looking for impulse legs and
00:08:51
swing points it's got to be very very
00:08:54
obvious so I'm looking at the most
00:08:56
obvious swing point is swing low and
00:08:58
swing High notice how we violate these
00:09:02
fair value gaps and this is where
00:09:03
Traders think that fair value gaps don't
00:09:05
work but they're getting the context
00:09:07
wrong these fair value gaps are resting
00:09:09
in such a premium that they fail because
00:09:11
it's going to Target this fair value Gap
00:09:13
then when prices are
00:09:16
rebalanced right and is more out of
00:09:18
balance for uh sellers right this Market
00:09:22
down here is in a discount now so once
00:09:25
it's in a discount it's offering you an
00:09:28
opportunity to make money because this
00:09:29
Market is now out of balance based on
00:09:32
this specific uh swing it's out of
00:09:35
balance and it's um oversold quote
00:09:39
unquote now maybe the ICT uh Fanatics
00:09:42
are going to come after me um but you
00:09:44
know it's basically just how I'm
00:09:46
processing things so this really was
00:09:48
just one example but you guys can see
00:09:49
here that there's another example here
00:09:53
okay now I don't know if there's I don't
00:09:55
see any bullish fair value gaps in here
00:09:57
but if you saw one on the lower time
00:09:58
frame you would just completely ignore
00:09:59
it because this is the fair value Gap
00:10:01
that's resting in a discount that
00:10:02
they're going to Target before it goes
00:10:04
higher okay so we need markets that you
00:10:06
know are out of balance right that's the
00:10:08
whole point of using this we have a
00:10:12
buyer buy side imbalance it needs to get
00:10:14
rebalance and uh that price needs to be
00:10:17
offered again right based on that range
00:10:19
to be able to go higher needs to be in a
00:10:21
discount another example you have a buy
00:10:25
a fair value Gap here right that fails
00:10:28
and then it go goes to fill in what it
00:10:30
goes to Discount here right this buy
00:10:33
side imbalance is resting in a discount
00:10:35
now there's definitely risk in it
00:10:37
possibly trading lower because there's
00:10:38
another fair value Gap all the way down
00:10:39
here um and that's part of trading that
00:10:42
we're just not going to understand
00:10:43
there's multiple fair value gaps that
00:10:44
appear all right there could be multiple
00:10:47
other Concepts that you are seeing that
00:10:48
appear and it's just part of trading
00:10:51
part of trading is finding a high
00:10:52
probability trade that doesn't mean a
00:10:54
trade that's going to work out 100%
00:10:56
Sometimes the best A+ setups fail okay
00:11:01
uh and if you're trying to trade uh from
00:11:03
a short-term perspective you can use
00:11:05
these failed fair value gaps as
00:11:07
inversion levels to just get a short uh
00:11:09
quick counter Trend trade to fill in uh
00:11:12
an imbalance that you're seeing okay so
00:11:14
you guys can see it came down hit that
00:11:17
50% of this range and then shot off
00:11:22
again okay so this fa value Gap is
00:11:25
resting in discount this one is
00:11:27
not now when it comes to premium it's
00:11:29
the same thing we have fair value apps
00:11:32
that are in discount right so we have
00:11:34
three candle pattern there's a gap there
00:11:37
this is really the high probability fair
00:11:39
value Gap this one not so much right
00:11:42
because it's resting in a discount based
00:11:43
on this current Swing Swing High swing
00:11:46
low a very visible swing if I zoomed all
00:11:48
the way out you guys could easily see
00:11:50
that swing Point okay it's very
00:11:53
visible um I'm not sure if I reviewed
00:11:57
this same example here but you guys can
00:11:59
can see
00:12:00
here we have another bearish for Val Gap
00:12:03
um I don't believe this is really this
00:12:05
might be 50% of this swing I didn't
00:12:07
measure it out but let's say if there
00:12:10
was a fair value Gap that appeared lower
00:12:12
down here you know just for example
00:12:14
let's say if a bearish fair value Up
00:12:15
appeared down here that's not the high
00:12:17
probability one the high probability one
00:12:19
is going to rest higher up in that
00:12:23
range
00:12:25
here same thing we have this fair value
00:12:28
Gap resting in discount
00:12:29
and this is why it's so interesting and
00:12:31
maybe the markets are run by an
00:12:33
algorithm or maybe they're not maybe
00:12:34
it's all
00:12:36
mathematical you know these markets
00:12:38
really are engineered so when you're
00:12:40
finding the proper swing points you will
00:12:42
find that fair value gaps
00:12:45
appear at these premium and discount
00:12:48
levels okay coincidence I don't know
00:12:51
that's not for me to answer I just know
00:12:54
when it provides these opportunities I'm
00:12:56
going to short the market all right
00:13:08
okay essential tip number two size
00:13:11
Matters the larger the fair value Gap
00:13:13
shows larger inbalances in price and I
00:13:16
usually avoid tiny and less obvious fair
00:13:19
value gaps just like I mentioned with
00:13:20
the swing points it's got to be obvious
00:13:23
to me so a larger fair value Gap depicts
00:13:26
what a larger imbalance between buyers
00:13:29
and sellers right those are your high
00:13:32
probability setups okay the tiny ones
00:13:34
and the less obvious ones there's not
00:13:36
that much of an imbalance between buyers
00:13:37
and sellers so obviously it's going to
00:13:39
be a lower probability
00:13:44
trade in this example you guys can see
00:13:47
here what we have a very small fair
00:13:49
value Gap and we have a large one you
00:13:52
guys can see that yes we did respect the
00:13:55
um this Fairway Gap based on the bodies
00:13:58
of the candles but how many times are
00:13:59
you going to end up getting stopped out
00:14:01
in here trying to go
00:14:02
long without realizing that there's a
00:14:04
larger fair value gy below you all
00:14:07
right so uh part of trading fair value
00:14:11
apps properly is your stop- loss
00:14:13
placement which we'll get into in a
00:14:14
little bit but your stop- loss placement
00:14:17
is going to play a vital role in you
00:14:19
being able to profit from these trades
00:14:20
or not and how confident you are in
00:14:22
trusting these trades okay cuz if you
00:14:24
get stopped out a couple times that
00:14:26
third trade might pay for all the losers
00:14:29
all right but if you're thinking that
00:14:31
it's going to go lower and we haven't
00:14:33
violated this fair value Gap well you're
00:14:35
not really going to be a happy camper
00:14:37
okay because you tried longing twice the
00:14:40
third time it didn't work out or so the
00:14:42
first two times didn't work out so you
00:14:44
decide to go short the third time and
00:14:46
then all of a sudden what happens that's
00:14:47
when the real move happens all right so
00:14:50
be less uh quick to change your bias
00:14:53
based on specific price
00:14:56
action here another good example this
00:14:59
this is just a very small Fair Val app
00:15:01
this is obvious okay the fact that we
00:15:03
haven't retested in that level what
00:15:05
happens this is really where they're
00:15:09
trying to reach to they're trying to
00:15:10
reach into this level to rebalance it
00:15:12
and then trade lower this is large fair
00:15:14
value Gap that needs to be rebalanced at
00:15:17
some point okay so it would not make
00:15:19
sense to me if the market traded in this
00:15:21
fair value Gap and then dumped right CU
00:15:24
I see this happen all the time they're
00:15:27
waiting to run these Fair gaps into
00:15:29
higher levels you know and bigger
00:15:32
imbalances and then they're going to
00:15:33
take it
00:15:36
lower another example here you have a
00:15:39
very small fair value Gap here but
00:15:41
really this is the better fill price so
00:15:44
when you're thinking about trying to go
00:15:45
long in here well yes it did work like
00:15:48
where is your stop loss okay like
00:15:51
where's your stop loss in here this tur
00:15:55
value Gap you know if you used the the
00:15:57
low of this candle you would Been Told
00:15:59
fine and you're getting better risk
00:16:01
reward out of this specific trade okay
00:16:03
so so instead of buying it up here right
00:16:06
maybe you're buying it down
00:16:09
here and just keep in mind guys that
00:16:13
this is not going to be picture perfect
00:16:14
like I mentioned in the examples
00:16:16
sometimes we get uh markets that trade
00:16:18
to fair value gaps and never uh you know
00:16:20
they never go sideways like this and
00:16:22
other times where it hits that fair
00:16:24
value Gap and then it just dumps
00:16:25
straight away all right that's it's just
00:16:28
part of the game it's part of um the
00:16:30
uncertainty with all of this all
00:16:38
right now finally tip number three fair
00:16:41
value gaps may require one two three or
00:16:44
more attempts before the trade idea
00:16:46
works out so your trade idea is often
00:16:49
not invalidated until you actually start
00:16:52
seeing some major reasons for trades to
00:16:55
to turn around okay so look at this fair
00:16:57
value gap for example if you were trying
00:16:59
to go long on this fair value Gap maybe
00:17:01
you went long as soon as it traded down
00:17:03
into it here all right maybe you took a
00:17:06
loss right you put your stop there you
00:17:08
took a loss here maybe you went long
00:17:10
again here and it got a little bit of a
00:17:13
run but maybe you moved your stop to
00:17:16
break
00:17:17
even okay so like let's say if you
00:17:19
entered here and then you it ran up here
00:17:22
and then all of a sudden you move your
00:17:23
stop to break even to well let's let me
00:17:26
go back let's say you entered here right
00:17:28
right it rallied a little bit then you
00:17:30
move your stop to break even here you're
00:17:32
getting stopped out a break even so now
00:17:33
all of a sudden you're one in
00:17:35
one all right are you going to be able
00:17:38
to have the confidence to take the trade
00:17:40
again and that's why stop loss placement
00:17:42
is so important uh and it's just part of
00:17:46
learning how to trade properly and
00:17:48
understanding that sometimes you have to
00:17:49
give your trade a little bit more leeway
00:17:51
right and where is the proper stop lall
00:17:54
placement that's all things that for you
00:17:56
for you guys to figure out a lot of
00:17:58
times times I'll I'll air on the side of
00:18:00
know maybe leaving at 50% of the fair
00:18:03
value Gap so if you left at 50% of the
00:18:05
fair value Gap it's only touching down
00:18:07
into that level one time here or if you
00:18:10
use a low of the fair value Gap because
00:18:11
it's a large fair value Gap because
00:18:13
typically when you get a very very large
00:18:15
fair value Gap like this you don't want
00:18:17
to see a trade to the other end of that
00:18:19
look at this one for example this is a
00:18:21
very large fair value Gap if I was to
00:18:23
short this level I would not want to see
00:18:26
it go all the way to the high right the
00:18:28
fact that ran to the high that's giving
00:18:31
me indication that maybe I'm wrong and
00:18:32
the market is going to go the other way
00:18:33
look what happens goes the other
00:18:38
way this is another great
00:18:40
example right just because this fair
00:18:43
value Gap is getting retested so many
00:18:46
times does not make the trade invalid it
00:18:49
just makes you
00:18:52
impatient because let's say if you're
00:18:54
abandoning this idea the fact that we
00:18:56
have this very large fair value Gap this
00:18:58
is a
00:18:59
chunky fair value Gap not only that but
00:19:01
the context behind is we created a new
00:19:03
low so we're creating a market structure
00:19:05
shift here so we have a market structure
00:19:08
shift here this fair value Gap is pretty
00:19:10
large all right if you shorted the first
00:19:13
retracement and put your stop loss you
00:19:15
know all the way at the high of that
00:19:17
fair value
00:19:18
Gap now it becomes a test of
00:19:21
patience do you have the fortitude to
00:19:25
stick with the trade idea and let it pan
00:19:27
out
00:19:29
okay cuz this is not a short period of
00:19:32
time we're talking about the
00:19:36
23rd all the way till the 29th this is 6
00:19:41
days later and then it finally starts
00:19:43
moving okay this is on a 1 hour time
00:19:45
frame by the way so if you're seeing
00:19:47
something on the 15minute you know it
00:19:49
might be a couple hours this might be a
00:19:51
day later you know are you going to
00:19:53
abandon your trade idea because it keeps
00:19:55
retesting your patience right you have
00:19:58
the patience and fortitude to stick with
00:20:01
this trade idea long enough to see this
00:20:03
run because I guarantee you if you can
00:20:06
time it right and scale into
00:20:08
trades this run here is going to more
00:20:11
than make up for your one two three
00:20:13
losses okay that's proper risk
00:20:16
management to me when I take you know
00:20:19
one to two three small losses on a tra
00:20:23
trade idea that third or fourth position
00:20:27
if I can scale in multiple entries as it
00:20:29
starts running in my favor now all of a
00:20:31
sudden it's not just a one to3 risk
00:20:34
reward anymore you can turn those trades
00:20:36
into home runs guys and this is the
00:20:40
power of fair value gaps when you can
00:20:42
stick with a trade idea that makes sense
00:20:43
that has context behind it you have to
00:20:46
be able to trust these setups and that
00:20:47
only comes with
00:20:48
experience I'm just kind of walking you
00:20:51
guys through some of the examples that I
00:20:52
see but these examples occur all the
00:20:54
time right same thing here we have
00:20:58
fair value gaps being retested retested
00:21:02
retested but you know do you have the
00:21:05
fortitude to be able to catch the one
00:21:07
that really matters all right yes these
00:21:09
ones pay off short term so like yes you
00:21:11
can go long here and then maybe exit at
00:21:13
the highs but where's the Home Run trade
00:21:18
the Home Run trade is really here
00:21:19
because if you could scale into this
00:21:21
trade and then you get this massive run
00:21:22
like this and then you're exiting at the
00:21:25
highs right again this trade makes up
00:21:28
for all of this sideways price
00:21:30
action so again recapping these guys you
00:21:33
know making sure that you have fair
00:21:34
value gaps that are presented in
00:21:36
discount vers
00:21:37
premium the larger the fair value Gap
00:21:40
the bigger imbalance there is and I
00:21:42
usually avoid the small
00:21:43
ones and fair value gaps may require one
00:21:46
to three uh you know one to three or
00:21:48
more attempts before the trade idea
00:21:49
works out so pair this concept with
00:21:53
context right do I have a draw on
00:21:55
liquidity um you know is the market in a
00:21:58
trending environment are there reasons
00:21:59
for the market to trade in the same
00:22:01
direction that the fair value Gap is
00:22:03
being presented this basic concept is
00:22:05
powerful on its own but when you combine
00:22:07
it with the right mindset and Market
00:22:09
context you're on your way to becoming a
00:22:11
consistently profitable Trader if you
00:22:13
want to learn more about the mindset it
00:22:14
takes to become a Seven figure Trader
00:22:17
I've put together seven of the biggest
00:22:18
lessons I've learned over my 14 years in
00:22:21
the markets you guys can check that
00:22:22
video out right here and as always
00:22:25
thanks for watching and I'll see you
00:22:26
guys in the next video
