I've noticed that many traders overlook one of the most effective analysis techniques — fair value gaps. Honestly, when I first understood this approach, my FVG trading became much more successful. The thing is, the market often moves so quickly that it leaves imbalances between supply and demand. And these imbalances are a goldmine for those who know how to spot them.

The core idea is simple: when the price moves sharply in one direction, it creates a void in the price range. The market then pulls the price back to fill this void — like a magnet. It’s not magic; it’s just market mechanics. A fair value gap occurs when there’s no overlap between the high of one candle and the low of the next. See such a gap — that’s your zone of interest.

How to recognize this opportunity? Look at the market structure. Usually, a classic pattern looks like this: the first candle moves in the trend direction, the second creates a gap, the third continues the movement, leaving the imbalance unfilled. This is a three-candle sequence that works again and again. These gaps are especially visible in volatile markets — cryptocurrencies, forex, indices. After news events, chasing FVGs becomes simply essential.

Why does this work? Because these zones act as dynamic support or resistance. The market constantly tries to restore balance, and traders are aware of this. When the price returns to the gap, it often reacts strongly there. This is a high-probability trading setup if you read it correctly.

Now, about practice. The first rule — don’t rush. As soon as you notice a gap, wait for confirmation. Wait until the price returns to the zone and shows a reversal signal — it could be a candlestick pattern or a break of a key level. The second — combine it with other tools. If your FVG trading aligns with Fibonacci levels or moving averages, it increases the likelihood of success. For example, if the gap coincides with a 50% Fibonacci retracement, that’s a serious signal.

Trade in the direction of the trend. In an uptrend, look for gaps that act as support. In a downtrend — as resistance. This is a basic rule, but it works. When the price reacts to the gap zone, you enter. Place your stop-loss just beyond the gap, and take profit at the next support or resistance level. And most importantly — never risk more than 1-2% of your capital on a single trade. Risk management is what separates professionals from amateurs.

Let me give some examples. In an uptrend, you see a large bullish candle creating a gap above the previous one. The price then returns to this zone, finds support, and continues rising. You enter a long position right in the gap zone — a classic setup. In a downtrend, it’s the opposite: a bearish candle creates a gap downward, the price returns, meets resistance, and falls further. A short position in the zone — and everything works.

Of course, there are many mistakes. The main one — overtrading. Not every gap will lead to profit. Be more selective. The second mistake — ignoring the context. FVGs work best in trending markets, not sideways ones. The third — impatience. Premature entries kill accounts faster than anything else.

If you seriously want to develop in FVG trading, start small. Practice on charts, find patterns, understand the rhythm. Combine fair value gaps with other analysis tools. And most importantly — practice risk management. This isn’t just advice; it’s the foundation. Mastering this technique will give you a serious edge in the market. Good luck in trading.