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if you want to trade like the pros you
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need to understand fair value gaps in
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this video we'll break down how these
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powerful smart money Concepts work
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mastering this can give you a serious
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Edge in the market we'll break down fair
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value gaps what they are why they matter
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and how to identify them both manually
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and automatically plus we'll walk
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through a simple trading strategy to
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help you trade them effectively at the
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end we'll apply what we've learned with
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real chart examples so you can see these
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Concepts in
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[Music]
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action so what is a fair value Gap
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imagine having the ability to spot
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hidden trading opportunities that most
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Traders miss all while keeping your
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strategy simple and effective in the
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financial markets where every decision
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can mean profit or loss having an edge
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is
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everything that's where the fair value
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Gap trading strategy comes in used by
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smart price action Traders this method
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is surprisingly simple yet in incredibly
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powerful helping you navigate the
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markets with confidence and precision a
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fair value Gap also known as a market
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imbalance occurs when strong buying or
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selling pressure causes a rapid price
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movement leaving a gap in the market
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these gaps are key to the fair value Gap
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strategy as the market tends to correct
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Itself by revisiting these price levels
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before continuing its
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Trend Traders use fair value gaps to
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identify potential entry and exit points
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as they act as markers on the chart the
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concept is based on a three Candlestick
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formation where a sudden price surge
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creates an imbalance leaving a gap
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between the first and last candle wicks
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there are different ways to Trade Fair
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Value gaps personally I prefer to place
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my entry within the Gap and position my
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stop loss below it to protect against
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any sudden moves regarding takeprofit I
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leave it up to you to decide as long as
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it aligns with your risk management
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strategy before we jump into the
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practice part where you get to spot the
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fair value gaps yourself let's examine
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two examples from the chart first we
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begin with a buy setup step one identify
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a strong candle look for a bullish
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candle with a long body around 70% of
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the total candle length and relatively
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small Wicks this indicates a strong move
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in One
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Direction step two check for incomplete
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overlap the two candles immediately
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before and after the strong candle
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should not not completely overlap its
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body there should be a gap between the
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high and low of these candles and the
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strong candle's body step three Define
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the fair value Gap the fair value Gap is
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the price range between the high of the
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candle one and the low of the candle
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three this Gap represents an area where
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price moved quickly leaving unfilled
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orders creating a potential zone for
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price to return to in the future now
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let's look at a cell setup the process
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Remains the Same first try to identify a
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strong cell candle look for a bearish
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candle with a long body making up about
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70% of its total length and relatively
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small Wicks this signals strong downward
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move two check for incomplete overlap
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the two candles proceeding and following
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the strong cell candle should not
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completely overlap its body there should
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be a clear gap between their high and
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low points and the body of the main
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bearish
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candle step three Define the fair value
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Gap the fair value Gap in this case is
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the price range between the high of the
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third candle and the low of the first
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one the price would tend to touch the
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gap before continuing its downtrend move
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and is definitely a solid point to place
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the sale trade like the case here before
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I share a simple fair value Gap trading
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strategy and jump into the practice
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session let me show you how to do it
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fully automatically first open your
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trading view chart it's important to use
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a higher time frame starting from 1 hour
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and above as fair value gaps on Lower
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time frames like the 5-minute chart are
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not as solid or
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reliable next click on indicators and
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type fair value Gap in the search
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box you'll see multiple options but my
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favorite is fair value Gap by Lux algo
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simply double click it and it will be
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added to your chart no need to adjust
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any settings I usually stick with the
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default ones all fair value gaps will
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automatically appear on the chart
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bullish gaps in green and bearish in red
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this saves a lot of time and makes
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trading much more
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efficient now let me share my favorite
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fair value Gap trading strategy that
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that you can use to trade Forex crypto
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or basically any Market relying solely
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on Fair Value gaps is not a good idea as
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they can produce false signals a
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Trader's goal is to increase the
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probability of being on the right side
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of the market the more confirmations you
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use the stronger your setup and the
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higher the chances of hitting your
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takeprofit to improve accuracy here's
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what I would do
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first add the 200 moving average to the
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Chart there are different variations of
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this indicator but personally I like to
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stick with the exponential moving
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average I usually mark it in Red so it's
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easy to spot this indicator helps
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determine whether the market is in an
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uptrend or
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downtrend basically when the price is
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above the 200 moving average we should
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only look for buy entries and when the
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price is below it we would only consider
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sell signals
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here's an example we can see that the
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price is currently above the 200
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exponential moving average signaling an
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uptrend where we should only look for
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buy entries on top of that a bullish
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fair value Gap has formed right here
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providing us with a potential trade
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setup based on this I will place my buy
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order at this level which will be
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triggered when the price pulls back to
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test the fair value Gap a few hours
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later the price touched the fair value
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Gap formed a bullish hammer and our buy
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order was activated as expected the
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price continued its upward rally and
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successfully hit our takeprofit
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now before we jump into the practice
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session let's take a look at a sell
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example I'm sure you've got the logic by
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now here we can see that the price is
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below the 200 exponential moving average
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confirming that the market is in a
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downtrend meaning we should only
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consider sell entries additionally a
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clear bearish fair value Gap has formed
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presenting us with a solid trade
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opportunity with that in mind I'll place
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my sell order at this level which will
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be triggered once the price pulls back
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to test the fair value Gap we can say
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that the fair value Gap would act as a
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magnet pulling up the price and giving
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us an opportunity to enter the market at
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a better price level a few hours later
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the price tapped into the fair value Gap
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formed a longwick bearish candle and our
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sell order was activated as expected the
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price continued its downward move and
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successfully hit our takeprofit
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now let's dive into the practice session
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I'll show you the chart and it's your
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turn to spot the fair value gaps on your
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own you'll have five seconds for each
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one let's see how sharp your eyes are
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there will be a total of 10 fair value
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gaps drop a comment below and let us
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know how many you manag to spot the
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perfect score is 10 out of 10 can you
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get them all
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but before we begin don't forget to hit
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the Thumbs Up And subscribe to the
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channel so you never miss out on our
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future videos let's get started
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I hope you score a perfect 10 today and
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learned how to trade Forex with the fair
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value
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Gap don't forget to hit the Thumbs Up
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And subscribe for more powerful trading
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tutorials a huge shout out to our paid
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members your support means the world to
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us and keeps us motivated to create even
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more valuable content happy trading and
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see you in the next
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video for
