Speaker A
What's going on, guys, and welcome to fair value gaps explained. So today is going to be another video that is a very, very crucial concept in understanding because fair value gaps represent imbalances within the market. And like I said, I
Learn about fair value gaps, market imbalances, and how they influence price action and trend continuation in trading.
Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.
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Key Takeaways
- Fair value gaps are crucial for understanding market imbalances and price movement.
- They help traders identify potential continuation zones based on order flow and liquidity.
- The pattern relies on gaps between candlestick wicks, not the color or traditional candlestick patterns.
- Filling a fair value gap often signals a continuation of the existing trend.
- Invalidation of a fair value gap occurs when price closes beyond the gap, removing its predictive value.
What the video covers
- Fair value gaps represent imbalances in the market where there is a lack of orders between candlesticks.
- A fair value gap is identified as a three-candlestick pattern with a gap between the first candle's top wick and the third candle's bottom wick for bullish gaps, and vice versa for bearish gaps.
- Fair value gaps indicate areas where price moved rapidly due to a lack of opposing orders, creating an imbalance.
- These gaps can be used to predict price behavior, such as trend continuation when price revisits and fills the gap.
- The color of the first and third candlesticks does not matter; only the wicks and the gap between them are important.
- Bullish fair value gaps show a lack of sell orders, while bearish gaps show a lack of buy orders.
- Fair value gaps differ from traditional candlestick patterns, focusing on order flow and liquidity rather than pattern shapes.
- When price fills these gaps and order flow confirms, it often leads to continuation of the current trend.
- Fair value gaps become invalid if price closes strongly above or below the gap area, removing their relevance.
- The video also explains how to identify and interpret both bullish and bearish fair value gaps with chart examples.
Chapters
- 00:00Introduction to Fair Value Gaps
- 01:49Why Fair Value Gaps Matter vs Traditional Patterns
- 03:25Defining a Fair Value Gap and Its Components
- 04:46Bullish Fair Value Gap Explained
- 06:09Order Flow and Imbalance in Bullish Gaps
- 07:48Bearish Fair Value Gap Explained
- 09:23Identifying Gaps and Order Imbalances in Bearish Scenarios
- 11:23Invalidation and Removal of Fair Value Gaps
- 18:20Summary and Final Thoughts
Full Transcript — Download SRT & Markdown
Speaker A
believe it was during the liquidity video, price is always either moving to take out liquidity or to fill an imbalance. So you can understand why this is going to be a very important concept for us to learn. So, we're just
Speaker A
going to jump straight into this. Um, so before I actually break down what a fair value gap is, why it's beneficial for us, I use two different words to talk about fair value gaps, just so you guys don't get confused during this
Speaker A
video. I'll either call it a fair value gap or I'll call it an imbalance. It's the same thing. It's literally just an imbalance in price. Um, fair value gap is just a nice way to call it. So what
Speaker A
is—well, I mean, we just explained what a fair value gap is. It's an imbalance in price. So it's essentially a three-candlestick pattern where price has one set of price movement and then an expansionary price movement and then
Speaker A
another set of price movement where there is an imbalance of price and a lack of orders that is in between the first and the third candlestick. And this is really like a lot of people, they trade candlestick patterns. I don't
Speaker A
trade candlestick patterns. Candlestick patterns are like head and shoulders, double top, double bottom. Like I don't really believe in that [ __ ]. Um, because it's like, again, why is price moving the way that it is? You don't [ __ ]
Speaker A
know. You're just saying, "Hey, I saw the McDonald's pattern on the chart and I decided to press sell." Me personally, I like to know, hey, I'm entering it because orders are being filled and I saw a change in order flow and
Speaker A
then from there I saw a continuation of the order flow that orders were filled in from the liquidity sweep. That makes a lot more sense than I saw a head and shoulders pattern on these random-ass candlesticks. Like, what is that
Speaker A
even telling you? It tells you a whole bunch of nothing. So that's why, um, I don't trade candlestick patterns.
Speaker A
However, fair value gaps are essentially a three-candlestick pattern. It's a series of consecutive candlesticks. And this is pretty much how it's going to look. And then I'll show you guys examples of what it looks like on the chart. So, we have
Speaker A
one candle, two candle, and then we have our third candle. Okay? And we'll go ahead and we'll use little trend lines to do the fair—the wicks of the candle. This bottom wick doesn't really matter. This candle's wick doesn't really matter
Speaker A
either. We can just do it like this. Really, just the top and the bottom wick matter. So, this is essentially what a fair value gap looks like. Okay. Um, I really only drew out the necessary portions of this, but it's a three-
Speaker A
candlestick pattern where we have the first candlestick, okay? And then we have a wick that goes up. We have the expansionary candle, okay? So, the candle that pushes price pretty, pretty drastically up. This is an example of a
Speaker A
bullish fair value gap. And then we have the third candle. Fair value gaps, we do not see color.
Speaker A
Okay? So, fair value gaps, we are not racist. We do not care what color the first or the third candlesticks are.
Speaker A
Okay, now you're probably saying, "Okay, well, what if this was a bullish candlestick?" Then the bullish candlestick would just look like this.
Speaker A
We would just flip this [ __ ] right on around. Okay, let me move this away. If it was a bullish candlestick, it would look like this. And this would still be a fair value gap. Okay, the first
Speaker A
candlestick could even be a down candle. Okay, so the candle could look something like this.
Speaker A
Okay. And this would still be a fair value gap. Okay. So, this can be a—well, this is still actually an up candle. So, um [laughter] how do I make—well, yeah. Okay.
Speaker A
Let's—yeah, because the first one was actually a down candle. So, let's say it looks like this. There we go.
Speaker A
This is a down candle here. Boom. This is still a fair value gap. [snorts] Okay.
Speaker A
All that we need in order for there to be a fair value gap is a gap between the first candle's top wick and the third candle's bottom wick. Okay. So, this is where we have an imbalance in price.
Speaker A
Now, why is there an imbalance in price? Well, let's think about our candlestick anatomy real quick. Price opened, price opened up here, right? And at some point in time, price pushed up, up here and then what happened? We had sell orders
Speaker A
that ended up pushing price down. So, we had buy orders that pushed price up and then we had sell orders up here to push price down and then we eventually had sell orders that caused us to close right here. This next candle we open and
Speaker A
then we get buy orders that boom, push price all the way up here and then we have sell orders that push price down. Then from here we have open and then we have buy orders that push price up and then we have sell orders
Speaker A
that push price all the way down to here. Okay. So, what do we notice? We noticed that there is a lack of sell orders within this gap. How do we know that? Because at some point in time, price pushed up. Okay. And then what
Speaker A
happened? There were sell orders to push price down to have price actually end up closing this as a bearish candlestick.
Speaker A
And again, the first and the third candle, we do not see color. We do not care what the first and the third candlestick color is. Why? We only care about the candlestick wicks and to see if there's a gap in between the first
Speaker A
candle's top wick and the third candle's bottom wick. Okay? If we look at this third candle, what happens? We get sell orders that push price down to here and then buy orders that push price back up.
Speaker A
So, where is there a lack of sell orders in the market in this candlestick pattern? All within this gap here. Now, why is this a bullish fair value gap?
Speaker A
Well, because we know that this expansionary candle was able to swiftly move through this imbalance of price action. Okay, imbalance of price. Why?
Speaker A
Because there was a lack of sell orders within here. So, if we fill buy orders all the way through this candle, the second that we hit this area, boom, we're going to be able to push much higher. Same thing happens when we want
Speaker A
to go revisit this candle. Okay? So, this third candle closed up here. What will typically happen is price will want to come down and if price ends up filling this gap and we see buy orders out of it, what will that cause price to
Speaker A
do? It will cause price to push higher. Okay, this is what I call a continuation confluence because in this case we are already in an uptrend and this is a confluence that helps us identify a continuation of the trend. Okay, how do
Speaker A
we see continuation? Well, price is going to come down into this imbalance of price action where there's a lack of sell orders and if we see buy orders pushing price up and out of that, we know that the trend is going to continue
Speaker A
higher. Why? Because there's a lack of sell orders and if we fill buy orders right here, it's going to cause price to push higher. Now, let's show an example of a bearish fair value gap. Okay, so we have a candle right here. Again, it
Speaker A
doesn't—the first and the third candle, it does not matter what color they are.
Speaker A
Okay, really the only candlestick color that matters is the one in the middle. Okay, so this one is a down candle. Okay, so we have an up candle, then a down candle, and then we can even have another down
Speaker A
candle right here. Again, the first and the third candlesticks, it does not matter. And in this case, we are looking for a lack of buy orders. Okay, so we're going to take for a bearish fair value gap, we're going to take it from the bottom
Speaker A
wick of the first candle and the top wick of the third candle. And as long as there is a gap between the two. Okay. Yeah, this is fine. As long as there is a gap in between the two, then
Speaker A
this is an—this is imbalanced price action. Why is it imbal—
Speaker A
here. At some point in time, we had buy orders that push it up to here, but the buy orders stopped and then price ended up coming back down. So, where is there a lack of buy orders within the market?
Speaker A
All the way through here. How do we know that there's a lack of buy orders? Well, on this candlestick, we were only able to push price down here and then up. Buy orders pushed it back up. And then on
Speaker A
this expansionary candle, what were we able to do? Move very swiftly through this imbalance gap. How do we know that it's an imbalance? By looking at the third candlestick and seeing, oh, buy orders were only able to push price up
Speaker A
to here. So, what do we know that is in between these two candlesticks w candlestick wicks? We know that there's a lack of buy orders. So if we are in a downtrend and price pushes into this imbalanced price action and we see sell
Speaker A
orders coming out of that, what do we know? We know that sell orders have been filled within a price range where there's a lack of buy orders. And what is that going to cause the market to do?
Speaker A
Because there's a lack of buy orders. There's going to be no sort of hesitation. If we are able to fill orders in this gap, we are going to be able to push price lower. Okay? So all a fair value gap is is either in a bullish
Speaker A
sense there's a lack of sell orders within a current price range and then in a bearish fair value gap there's a lack of buy orders within a price range.
Speaker A
Okay. Now this is really all that I want to cover in today's video and I want to show you guys examples of this on the chart. Now, something please. Just like all of our other confluences, we are unable to take trades on just a break of
Speaker A
structure to the upside, on just a break of structure to the downside, on just price pushing above a high, on just price pushing below a low. We are slowly but surely learning all of the confluences that we need in order to put
Speaker A
them all together to be able to build a profitable strategy that gives us probability. But we cannot use these confluences on their own. And I'll show you several examples of this happening in real time. Actually, before I do
Speaker A
that, I need to show you guys examples of what a fair value gap is not so you guys don't get confused. Okay, so let's go here. Let's go here. Let's go here. Okay, let's say the third candlesticks wick goes all the way up
Speaker A
here. And this candlestick wick goes all the way down here. the first candlestick. Again, we draw these imbalances out from uh at least bearish imbalances from the bottom of the first candlestick and the top of the third candlestick wick. Okay. So, do we
Speaker A
have an imbalance here? No, because the wicks are overlapping, meaning there was enough buy orders down here to push price back up and there was enough buy orders from down here to push price all the way up through here. So, is there a
Speaker A
lack of buy orders? No. Buy orders over overlapped in this case. This is not an imbalance of price action.
Speaker A
Same thing to the upside. Okay, if this is a bullish for value gap, if this is a bullish for value gap, we get price to push up and then we have sell orders that pushes price back down.
Speaker A
So we know that sell orders stop on the first candlestick right here. And then we get a decent sized move up. But then on the third candlestick, what do we see? Sell orders that push price all the way down here. So we see an overlap of
Speaker A
sell orders. And there is not an imbalance. There is no lack of sell orders within this price range. So there is no not an imbalance. So price wants to come back down within this price range. That's we're not looking for a
Speaker A
fair value gap because there is none. Again, it's a gap between the first candlesticks top wick and the third candlesticks bottom wick when it is a bullish for rally gap. Okay, so now with that being said, let's show examples of
Speaker A
this on the chart. Let's go on to the hourly time frame. Show you guys an example. This is a perfect example right here. Okay, let's look at price right here. What are we in? We are in an uptrend. How do we know
Speaker A
that we're in an uptrend? Well, we have a high. We have a low. We have a higher high. We have a higher low. We have a higher high. And then we have a higher low. What do we notice about this higher
Speaker A
low? Where does this higher low retrace into? What's this? This is a bullish fair for value gap. How did we identify it? Well, we can see a gap between the first candlesticks top wick and the third candlestick bottom wick. Okay. So,
Speaker A
what do we know about this? there's going to be a lack of sell orders within this price range. So when price comes in and then pushes out of it, we can understand, hey, we pushed into an imbalanced price range and we saw buy
Speaker A
orders coming out of that. What is going what is that going to cause price to do?
Speaker A
It's going to cause price to push higher. Okay, let's show an example of a bearish for value gap.
Speaker A
We've been very bullish the past couple days, so bear with me. Uh, let me just go to the low time frame.
Speaker A
This is a good example right here. Okay, on the 15-minute time frame, we can actually see all of our confluences slowly starting start to come into play here. So, let's put this all together really quickly. What do we have right
Speaker A
here? We have a high. What does price do? Come up, sweeps the high. So, what do we have the potential to do? We have potential to fill orders up here. Then, what does price do? It comes down and it
Speaker A
breaks structure to the downside on this candlestick. Awesome. So, we see that orders were filled. We see confirmation that orders were filled through a break of structure to the downside. How do we know that this trend is going to
Speaker A
continue at least in the short term? Well, we have our continuation confluence which is a fair value gap right here. What is this? This is a bearish for value gap. If we look, we see the bottom of the first candle's
Speaker A
wick, the top of the third candle's wick, we have the expansionary candle. What does price do? Price pushes up into the imbalanced price action. And then from there, we see a bearish candle following that. And then from there,
Speaker A
price continues lower at least for the time being. Okay, so this is an example of a bearish for value gap.
Speaker A
Now, let's show an example of a fair value gap getting disrespected. And we're actually going to learn about this in a completely separate uh video because this can actually be used as a confirmation confluence, but we're not going to go there just yet. We are going
Speaker A
to talk about how to identify um a fair value gap that gets disrespected first.
Speaker A
Okay, we're not going to necessarily talk about um inverse fair value gaps just yet, but this is examples of fair value gaps getting disrespected. So, let's go here. Um let's go into the hourly.
Speaker A
This is a good example right here. And this just proves my point a little bit where we cannot just be taking trades off of these confluences willy-nilly just saying, "Hey, there's a fair value gap and then we got whatever a down
Speaker A
candle out of it. I'm just going to press the sell button." Okay, that's not how we do things around here. That's not what we're looking for. So, what do we have here? We have a bearish reval gap, right? We get a break structure to the
Speaker A
downside. Boom. We create a bearish value gap. the bottom wick of the first candle, the top wick of the third candle. We have a good expansionary candle right here. We see price come up and then we see a rejection candle right
Speaker A
here. However, what follows? We see boom, a big bullish candle. When is a fair value gap disrespected? When we get a candle closure, it's almost just like a breakup structure. When we get a candle closure above the gap. Okay. So, if we get a
Speaker A
bullish candle closure above our bearish fair value gap, that fair value gap is no longer valid and is no longer useful to to us. Okay? And in turn, I mean, this is kind of giving a hint at what
Speaker A
we're going to talk about for inverse for value gaps. That typically means the trend has changed and we are going to move higher.
Speaker A
Because again, if we think about this logically, a fair value gap is supposed to show a continuation of the current trend that we're in. So, if that fair value gap gets disrespected, that's pretty much saying that the trend that
Speaker A
we're in just got disrespected, similar to a break of structure. And hopefully you guys are slowly but surely starting to understand that. Okay, let's show an example of a bullish forv value gap getting disrespected. Same situation right here.
Speaker A
We have boom a gap. This is a bullish gap from the first candle's top wick to the third candle's bottom wick. This is the expansionary candle. We come in. Now, this is ju it's just like breakup structure, okay? where if we see a
Speaker A
candlestick wick that goes all the way down here, all the way down here, but we still do not close underneath the gap, it has not been disrespected yet. Obviously, very shortly after, we get a massive close underneath the gap and that disrespects
Speaker A
the fair value gap, but on this bullish candlestick closure, this gap is still maintained and is still valid. So, it's just like breakup structure where we need to see a candlestick closure underneath this line right here in order
Speaker A
for the gap to be invalidated. Now, there's a couple examples that I'm going to try and find on the chart that might confuse some people. Like right here, for example, what happens if we have a bunch of fair
Speaker A
value gaps stacked up on top of each other? Okay. So in this case we have boom a bullish for value gap right here.
Speaker A
And then we have another bullish for value gap right here. And then we have another bullish fair value gap right here.
Speaker A
Okay. What do we do when we have fair value gaps stacked up on top of each other? Well, all of them are valid.
Speaker A
Okay. So if we are in an uptrend and we end up closing especially so when they are stacked up on top of each other when we have bullish for valley gap bullish for valley gap bullish for valley gap
Speaker A
with no form of a retrace in between there that's very important with no form of a retrace in between these fair value gaps that are stacked up. So no down candles all of these all of these fair value
Speaker A
gaps are valid to be pushed into. So in this case, we end up respecting this fair value gap and then we push higher off of that. Okay?
Speaker A
When we do that, we can now remove all of these fair value gaps that are underneath and this one because it's been used. Why is that the case? Because if we were to just zoom out on the higher time frame,
Speaker A
pretty much this entire move up is just imbalance price action, right? Because it's just fair value gap stacked, stacked, stacked. So from here to down here is the imbalanced price price action. When price comes into the imbalanced price action and then pushes
Speaker A
higher, that means that price did not need to balance out any of this price action. And once we push above the high in a bullish scenario, then we no longer need to have these fair value gaps on our chart. Why? Because from here up to
Speaker A
here was the imbalance price action. Price came in, balanced out that imbalanced price action, and then decided to move higher. Okay. Now, on the flip side, price very well didn't have to respect this top fair value.
Speaker A
Yep. It could have closed underneath it. Does that mean that the trend has changed? No. Why? Because we still have this imbalance right here and we have this imbalance right here. So just because we invalidate this top fair
Speaker A
value gap doesn't mean that price still is unable to use this fair value gap right here. So price very well could have closed underneath this gap. That means that this gap isn't viable.
Speaker A
However, this one is. So price could have put its wick down under here and then if price did that and then pushed above this high, what does that mean?
Speaker A
Awesome. We balanced out the price range as much as we needed to and now price is going to continue higher and we no longer need this for value gap. Price could have done the same thing with the second fair value gap. We could have
Speaker A
closed all the way underneath here, put a wick into this fair value gap, and then from there pushed above the high, and that still would have been valid.
Speaker A
Okay? Let me show you an example that is not the case when we have fair value gaps stacked up on top of each other.
Speaker A
Okay? And I'll show you guys a bearish example as well. So let's use this as an example or let me try and find a better example here.
Speaker A
Oh yeah, this is a good example right here. Psych. We closed underneath that one.
Speaker A
Okay, this is a good example. No, it's not actually. I want to find a better example of this.
Speaker A
Okay, here we go. So, right here, what are we in? We're in an uptrend. Why? Because we closed above this recent high, right? We have a high, low, higher high. Awesome. We have several bullish fair value gaps that are
Speaker A
stacked up on top of each other. We have a fair value gap right here. We have a fair value gap right here. We have a fair value gap right here. And we have a little itty bitty Fair value gap. Uh, just kidding. We
Speaker A
don't. Okay, this still holds true, though. Okay, so what do we see price do? We see price push all the way through this fair value gap. Awesome. And we see a wick that goes underneath it and then into this
Speaker A
gap. And then from there, we get a bullish closure out of it. We're still in an uptrend, right? Because we don't break structure to the downside.
Speaker A
We don't break structure to the downside and price is gez in bullish market structure. So we come down, we fill this gap. Does that mean we have to reverse off of this gap?
Speaker A
Well, no. Because we have this gap right here and this gap right here that price could respect. Price goes lower, fills this gap, and then we get a bullish candle out of it. Awesome. From there, we know that, hey, price has balanced
Speaker A
out this price action. Why? because we see a bullish candle closure. Okay, from there we can say safely assume that price is going to move higher from there. Obviously, this all has to come with context. We need to put all of our
Speaker A
confluences together in order to make this happen. But we can see that this is a good example of price pushing through one fair value gap and then wanting to hit another one that's stacked up on on top of each other. And then from there,
Speaker A
once we fill this fair value gap and this fair value gap, do we leave this fair value gap on right here once we push above this high? No, we don't. This fair value gap is no longer valid. Why?
Speaker A
because we had an imbalanced price range from here all the way up to here. And we saw price come all the way down, balance it out, push above above this high.
Speaker A
Pretty much telling us, hey, this this imbalanced price action, that was all we needed to do. We didn't need to fill this gap gap to f to balance out that price action. So, in turn, you need to delete it from your chart. And you're
Speaker A
not going to drag it all the way over and say, "Yeah, this is going to be valid somewhere over here in like 3 years for price to come down and hit it as a bullish for value gap." [ __ ] no.
Speaker A
That's not the case. Okay, let me find a another example just so you guys can get this through your heads.
Speaker A
Um, I want to find a bearish example. Okay, this is a good example right here.
Speaker A
So, we have a bearish for value gap right here. And then we have another one stacked up on top of it right here. So, we have two consecutive bearish for value gaps.
Speaker A
We get a retrace up into it. We're in a downtrend and then we see a bearish closure underneath it and then we push underneath this low. Awesome.
Speaker A
Again, the imbalance price range is from here down to here. So, price very well could have pushed up and used this for value gap and pushed lower.
Speaker A
That would have been valid. But in this case, price is telling us, hey, we push into this. we push into the imbalanced price action and then once we push underneath this low. So on this candlestick, it's pretty much telling us, hey, we
Speaker A
balanced out everything that we needed within this price range. We no longer need to go back up into and to balance this out. So what a lot of people will do is they will look at this retracement on up and they'll be like, "Oh, it was
Speaker A
just filling the bearish for value gap." No, it wasn't price. This move up was not filling this bearish for value gap.
Speaker A
Why? Because this imbalance of price price action was already balanced out by this move up and then this move down.
Speaker A
So why did price move up here? It wasn't for the fair value gap. It was for the sweep of liquidity to take out these highs and then to push price lower.
Speaker A
That's where a lot of people will mess up. They will leave fair value gaps on the chart that have either already been used or they will leave fair value gaps like this one up here and drag it all
Speaker A
the way over here and then they'll see price come up into it and then see a little sell-off and they're like, "Oh, I'm going to take a short off of this." When that's the stupidest thing ever because we know that this was the
Speaker A
imbalanced price range and price already came up, filled this imbalanced price range and told us, "Hey, we balanced out that price range all that we needed." Okay, so we need to delete this fair value gap off of our chart or else
Speaker A
that's going to cause us to take short positions off of this and then end up getting [ __ ] and getting stopped out.
Speaker A
Okay, very very important. Okay, and we're going to go in deeper when we talk about inverse fair value gaps, how these stacked up gaps are going to work on that end. Um, but that's just this is just the first um the first little
Speaker A
lesson when it comes to fair value gaps. So hopefully you guys were able to understand that. Okay, what are fair value gaps? It's an imbalance in price.
Speaker A
Okay, how do we how do we identify it? It's from in a bullish scenario, it's from the top wick of the first candlestick to the bottom wick of the third candlestick with an expansionary candle in the middle. Okay, we what is
Speaker A
not a fair value gap? When the two wicks overlap in a bearish bearish scenario, it's from the bottom wick of the first candlestick to the top wick of the third candlestick with an expansionary candle in between. Can we have fair value gaps
Speaker A
that are stacked up on top of each other? Yes. Let me do one more example real quick just so you guys do not get confused here.
Speaker A
Let me show this to you guys. is one last example that I want to show you. We have a bullish fair value gap right here. And then we end up getting another one right here. Very little one. And then we
Speaker A
end up getting another one right here. Okay. So top we have this fair value gap right here. Price comes up. We get a retracement down. this fair value gap does not get filled and then we end up pushing above this high.
Speaker A
What do we do with this fair value gap once this high gets pushed above?
Speaker A
Do we keep it on our chart? Do we drag it over? No. Because even though this is imbalanced price action, when we see price come down and then close above this high to continue the uptrend that we're in, we
Speaker A
have a high, low, higher high, higher low, then we push up to make a higher high.
Speaker A
Yes, we have an imbalance of price action right here. Price does not have any obligation to us or the chart to have to fill this gap to have to fill out this balance imbalance price action.
Speaker A
Again, just like liquidity, just because we push above a high doesn't mean that price has to reverse off of it. It just has the opportunity and it just it it just has the opportunity to.
Speaker A
So, when we're in an uptrend and we have imbalanced a imbalanced price range right here and we get a retrace, but we don't end up filling this imbalanced price range and then we continue the trend by pushing above this high.
Speaker A
What is price telling us? It's telling us that hey, we didn't need this fair value gap to to push price higher. We didn't need to balance out this price action. So, what does that tell me about this fair value gap? We can boom get rid
Speaker A
of it from my chart. Why? Because we closed above this high and we pushed higher. Price was telling us that we did not need to balance out this price action right here.
Speaker A
Now, let's look again right here. We have a fair value gap, then another fair value gap, then we get a retracement down.
Speaker A
Following that retracement down, what do we do? We actually end up I mean, this was over the weekend, but we end up closing a lot higher or opening a lot higher. So, what does that tell me about both of these fair value gaps? Do we
Speaker A
drag them over because we're like, "Hey, this is an imbalance price action that can be used." No.
Speaker A
Price retraced and then pushed back above this high, continuing the uptrend. So, what is price telling us about these two imbalance price ranges? It was saying, "Hey, we understand that there's imbalance price right here, but we do not need that to continue the trend." So
Speaker A
price ends up pushing higher. So what do we do to these fair value gaps? We remove them from our charts. We do not drag them over. We that is not the reason for price to push higher right here. That is not the case. Okay? It is
Speaker A
only within the current trend that we are in. We don't drag it over. We aren't trying to say, "Hey, look, these fair value gaps from right here are going to get used all the way over here." No. Why? Because price already
Speaker A
pushed up into it and balanced out the price action from both of these fair value gaps right here. Both of these fair value gaps are stacked up on top of each other. There's no retrace in between. So, both of these are valid. We
Speaker A
have imbalanced price action from this candlestick wick to this candlestick wick. What do we see price do? Balance it out. And then boom, we come down and we close underneath the low. So, what does that mean about both of these
Speaker A
imbalances or about this imbalanced price action? Price wanted to balance it out. It did. And then when we push underneath the low, it's saying, "Thank you. We were able to fill these orders and now we're done with this imbalance
Speaker A
price action. So, what do you have to do to these fair value gaps? You remove them from your chart. Or else over here, you're going to say, "Oh, price is filling a imbalance price action where if we see sell orders out of that, then
Speaker A
we're going to go lower." No, that's not the case. Why? because price had already balanced out that price action.
Speaker A
Cool. Cool. That being said, love and appreciate you guys. We are going to talk about advanced imbalance concepts tomorrow or I can't remember if that's tomorrow or if inverse for value gaps are tomorrow. But regardless, we're going to continue imbalances tomorrow. I
Speaker A
love and appreciate you guys. I'll see you guys tomorrow.
Topics:fair value gapsmarket imbalanceorder flowliquiditycandlestick patternbullish fair value gapbearish fair value gapprice actiontrading strategytrend continuation
