Recently, I’ve been studying a technical tool used by many traders called FVG, which in Chinese is called Fair Value Gap. To be honest, I was a bit confused when I first encountered it, but after understanding the principle, I realized that this thing can indeed help identify some market inefficiencies.

In simple terms, FVG is a gap that appears on price charts, usually caused by excessive buying or selling pressure leading to significant price swings. These gaps represent areas where the market deviates from fair value, and the market often automatically corrects this deviation. My understanding is that the market is like a self-balancing system that cannot sustain this imbalance for long.

In practical operation, FVG appears as a pattern of three candles. In bullish situations, a gap forms between the wick of the first candle’s top and the wick of the third candle’s bottom, and this gap is the fair value gap. Conversely, in bearish cases, it’s the other way around. The key is that these gaps should not have overlapping candles; otherwise, it’s not considered a valid FVG.

Why pay attention to this? Because the market tends to return to fair value and then continue in the direction of the initial trend. In other words, these gaps are usually filled, and the process itself presents a trading opportunity. I often use this method when analyzing cryptocurrency charts to look for potential buy or sell points.

Of course, FVG is just one of many technical analysis tools. Understanding market dynamics also requires combining other factors. If you’re also trading, try identifying these patterns on your own charts to see if they can help you better understand market trends. Remember, this is not financial advice; any trading decisions should be made through your own research and judgment.