Skip to Content

36-ICT Mentorship Core Content - Month 4 - ICT Fair Value Gaps FVG

Last modified by Drunk Monkey on 2022-09-12 06:36
1 00:00:26,730 --> 00:00:36,450 ICT: We're gonna be dealing specifically with the reinforcing of fair value gaps. And it's a concept of trading inside the range. Okay, what is a fair value
2 00:00:36,450 --> 00:00:46,020 gap? It is a range in price delivery, where one side of the market liquidity is offered and typically confirmed with the liquidity void on the lower timeframe
3 00:00:46,020 --> 00:00:56,970 charts in the same range of price, price can actually gap to create a literal vacuum of trading, thus posting an actual price gap. Okay, let's take a look at
4 00:00:57,000 --> 00:01:00,000 a Euro dollar daily chart.
5 00:01:06,210 --> 00:01:10,920 Okay, and I'm gonna ask you where do you see an example of the fair value gap?
6 00:01:19,410 --> 00:01:28,710 Okay, I'm going to draw your attention to it here. So that blue shaded area here, on the daily chart, can we explain to you why I'm shading in that specific
7 00:01:28,740 --> 00:01:44,880 area of price, it's about a 20 pip range on the daily. But inside of that blue shaded area, that is what is commonly referred to in my work as a fair value
8 00:01:44,880 --> 00:02:01,920 gap. So take a look at what makes that gap so significant. As you can see here, the candle to the left of the down candle we're looking at it comprises the fair
9 00:02:01,920 --> 00:02:15,720 value gap. That's this candle here. Okay, and to the left of that we have the higher bearish candle. And I'm drawing attention to the fact that it has a down
10 00:02:15,720 --> 00:02:27,180 close, but it's come off the low. Okay, so we're looking at the low up to the close that little wick in there. If you take that same range, okay, and you look
11 00:02:27,180 --> 00:02:43,740 at our down candle that created that fair value gap on the daily chart that range between one to 515 to approximately 105. Big figure inside our down
12 00:02:43,740 --> 00:02:56,340 candle. And in this candle here that's highlighted from the low to the close. That price range has been traded up into once already delivering the buy side
13 00:02:56,340 --> 00:03:07,290 liquidity. And other words on this candles low up to the close price had come off that low. So if it came off that love to have a higher close on that candle,
14 00:03:07,770 --> 00:03:18,750 that means the buy side liquidity had been offered on that range between 105 15 to one of our big figure. So that means when we look at the down candle that
15 00:03:18,750 --> 00:03:29,310 makes the fair value gap, we're not concerned with the 105 15 to 105 big figure price range. So we're going to be drawing our attention to that low here. And
16 00:03:29,310 --> 00:03:44,520 we'll draw that out in time. But let's now look at the other candle that frames our fair value gap. The next area at which we see buyside liquidity offered is
17 00:03:44,520 --> 00:03:56,220 from this green candle or up close candle to the right of our down candle that makes the fair value gap. The open to the high on this candle is offered by side
18 00:03:56,220 --> 00:04:10,470 liquidity as well. So we have seen price offered on the up movement or by side liquidity on two candles one to the left of our fair value gap, creating down
19 00:04:10,470 --> 00:04:24,390 candle on the daily chart and one candle to the right of it where we saw a price move higher in a portion of that down candle. So we have a range left that's
20 00:04:24,390 --> 00:04:36,420 open. And it specifically is this area right in here. So we're delineating the low of the previous candle and the high of the count to the right of the down
21 00:04:36,420 --> 00:04:54,000 candidate creates that little pocket of space. So between 105 big figure down to 104 75 about 25 pips that is our fair value gap and it's been left open. There's
22 00:04:54,000 --> 00:05:06,270 been no trading outside of the movement of that range except for that down candle In no up movement at all on this timeframe. Now when we're looking at
23 00:05:06,270 --> 00:05:15,000 fair value gaps, okay, it's important to remind you that if we're studying a specific timeframe, the gap occurs on the timeframe you're looking at. You can
24 00:05:15,000 --> 00:05:24,270 break this down further into smaller timeframes. But in the smaller timeframes, you'll probably end up seeing a liquidity void, where the gap would be indicated
25 00:05:24,270 --> 00:05:33,210 here, on this timeframe. On a lower timeframe, it would many times appear as a liquidity void where it's multiple candles that create the open space of range.
26 00:05:39,660 --> 00:05:48,450 Okay, so now we have our daily chart here we have our specific levels in mind that we're watching. And the two little line segments, delineating one candles
27 00:05:48,450 --> 00:05:56,250 low and one candle is high. In between those two reference points, we have that big down candle in the exposed area in between that is the fair value gap that
28 00:05:56,280 --> 00:06:03,840 only the sell side liquidity has been offered. So imagine that paintbrush analogy I've used many times in the past one of the down candle that creates the
29 00:06:03,840 --> 00:06:14,070 lowest low here, there's a range with the candle before and the candle after it, where it has left a pocket of porous price action, we're only delivered on the
30 00:06:14,070 --> 00:06:24,840 downside, we're going to expect price to eventually want to trade back up into that little gap area. So this area in here, that's where we're looking to see it
31 00:06:24,840 --> 00:06:37,080 fill in. That's the nature of a fair value gap. So when we look at price, and we're zoomed in a little bit now here we're at a four hour chart. Okay, and you
32 00:06:37,080 --> 00:06:50,970 can see the two specific price levels again, are delineated as well. And we have a low delaneys. For potential liquidity run on sell stocks below the low price
33 00:06:50,970 --> 00:07:02,580 does in fact go down below that previous low. And well now we can expect to see what form a turtle soup or a false break below an old low. Why would be
34 00:07:02,580 --> 00:07:10,050 reasonably expected to go back up to fill in that gap? Well, because we've already taken the sell side liquidity out by running an old low, we have equal
35 00:07:10,050 --> 00:07:22,470 highs here delineated also on our chart on a four hour basis. And right above those equal highs, we have our fair value gap. Eventually, price does in fact
36 00:07:22,470 --> 00:07:34,560 trade back up close to the fair value gap in that trade or that idea is now complete. While it doesn't look like a great deal of money or pips offered, it's
37 00:07:34,560 --> 00:07:44,430 a very highly profitable and probable condition in the marketplace where we can see these fair value gaps and double tops whereby socks will be resting above
38 00:07:44,430 --> 00:07:55,200 it. And if you see a turtle suit rumble on hold, well, you're in a range, this time of the year going into the end of the 2006 trading year, going into the
39 00:07:55,200 --> 00:08:04,200 holidays, trading is going to be range bound. And when you're in a range around consolidation type format, or profile for the marketplace, this is a style
40 00:08:04,200 --> 00:08:12,360 trading you want to be doing looking for stops and looking for fair value gaps. So it was well over 100 pips of a move. And it only took about two days to
41 00:08:12,510 --> 00:08:23,730 complete that little price swing. And in fact, this range of price action in the form of fair value gap was actually detailed to you. And the beginning of this
42 00:08:23,730 --> 00:08:36,720 week where we delineated on the daily chart, the fair value gap, as outlined here. And on the daily chart, you can see it's been filled in here. So while
43 00:08:36,720 --> 00:08:43,530 there's a lot of information about fair value gaps and breakaway gaps and measuring gaps, that's going to be coming your way in the form of the December
44 00:08:43,530 --> 00:08:54,570 study notes. Just understand that everything has been shown here is reversed. For buy side, liquidity runs where the market will come back and close in a fair
45 00:08:54,570 --> 00:09:04,080 value gap that's below the marketplace to seek to fill in the sell side liquidity. Now let's take a quick look at something else. Because I mentioned
46 00:09:05,340 --> 00:09:14,100 that the gaps, fair value gaps, liquidity voids, order blocks and liquidity pools they kind of overlap a lot of in a lot of different ways that you're
47 00:09:14,100 --> 00:09:22,620 probably not aware of yet. And that's what the benefit of having the PDF files, study notes and also the supplementary teachings that's going to happen next
48 00:09:22,620 --> 00:09:30,120 week, Monday through Friday while we're away from live trading and live sessions. With the ICT mentorship, you will be getting a daily video
49 00:09:30,390 --> 00:09:39,270 supplementing these specific techniques and concepts for the month of December. So to help you really dial in on the concepts going forward so that we are
50 00:09:39,270 --> 00:09:50,070 prepared and primed for the content for January 2017. But I want to take you back over to the charts and give you something by way of understanding the
51 00:09:50,100 --> 00:10:05,280 overlap of liquidity voids and fair value gaps. Okay, folks we're looking at at 104 75 level Have the charts trained in on a five minute, your dollar. And we're
52 00:10:05,280 --> 00:10:18,150 seeing the very moment that that 104 75 level was pierced here on the 19th is its second time it trades through that 104 75 level. And I want to just draw a
53 00:10:18,150 --> 00:10:34,260 special attention to this area up here. Okay. And now I'm going to show you what it looks like when we have a run above an old high, which is what this is one of
54 00:10:34,260 --> 00:10:39,450 the 475. It's also run on liquidity in the form of liquidity pool.
55 00:10:40,650 --> 00:10:52,380 So it's running by stops. But also, it's hitting that fair value gap also. So it's trading at a fair value gap. And I said on the lower timeframes many times
56 00:10:52,380 --> 00:11:05,280 this will create a liquidity void. See a movement lower here on this candle. And then we have another candle here. Look what happened. Next, candles open is down
57 00:11:05,280 --> 00:11:19,110 here. So you have this gap in here to price trades up into that and closes that in right there. See that? Price then moves lower.
58 00:11:31,020 --> 00:11:49,860 Significant break lower in the lower ultimately trading through to the sell stocks were mentioned earlier. Okay, let's take a look at it on a 15 minute
59 00:11:49,860 --> 00:12:00,960 basis. Here's the first time it trades up into that 104 75 level, closing that fair value gap. And then here's the second time it trades up into it running out
60 00:12:00,960 --> 00:12:15,540 the previous high. The previous high this time was at 104 77. This candle is high comes in at 104 78. So trades to it and just by one pip. Now what's the
61 00:12:15,540 --> 00:12:31,620 difference here we have a down candle here a lot of movement lower but it comes off that low. Watch what happens now. We gap we get from this candle close one
62 00:12:31,620 --> 00:12:46,680 of 472 to an opening on this candle of one and 470 now it's only two pips difference, but that creates a what a gap. So we can be a seller. At a more
63 00:12:46,680 --> 00:13:00,360 refined price level mentioned an earlier time we said that we could be a seller at 104 71 a limit. When price trades back up to that level, if it doesn't give
64 00:13:00,360 --> 00:13:08,940 us an opportunity to go on no limit, we can treat it right as it hits it live you can be in front of the charts. Right there. There's your cell now here's the
65 00:13:08,940 --> 00:13:20,160 thing look at the bodies close on this candle right here the close is 104 72 That's exactly the high on this candles, close 104 72 the wick trades through
66 00:13:20,160 --> 00:13:30,120 the body but the bodies of the candle completely closing here so this gap between these two candles these two black down candles, this gap in between the
67 00:13:30,120 --> 00:13:39,240 bodies have perfectly been filled in with this up candle. So this is exactly what I'm referring to as efficiency in terms of the price delivery. If this
68 00:13:39,240 --> 00:13:58,740 movement lower has been offered on the downside, okay, now think look closely, this candle is high comes in at 104 78 The close is that 104 75 The next candle
69 00:13:58,740 --> 00:14:14,100 it opens at one to 476 I'm sorry one to 474 and then it creates a high at one and 476 so it moves two pips up so from the opening to the high is buyside
70 00:14:14,100 --> 00:14:24,300 liquidity offered. Then it trades down for a down close. Then we gapped down here. There's a gap of buyside liquidity from these two candles from this
71 00:14:24,300 --> 00:14:35,460 candles opening. That's exactly where this price goes on the upside from the open to the high the openness 104 63 The highest 104 74 which is the opening
72 00:14:35,460 --> 00:14:48,720 here 104 74 That's the last planet which the biocide liquidity is offered on up movement. Then it's all down from the opening. It fills in that perfect delivery
73 00:14:48,720 --> 00:15:04,830 of price right there. And then at that moment, when you see this live, you can be a seller at that moment. price does exactly what we mentioned earlier, when
74 00:15:04,830 --> 00:15:16,410 we were looking at the higher timeframe. This delivery here price, from this candles low up to the close by Psy was offered here and buyside was offered from
75 00:15:16,410 --> 00:15:26,430 the opening to the high here. So there's a gap closure here, when all the downside movement here. So this is all been closed in so efficiently, we could
76 00:15:26,430 --> 00:15:40,800 look for this range being delivered lower, we have to consider back here where price was delivered on the buy side here. So this low comes in at 104 65. So he
77 00:15:41,130 --> 00:15:53,730 dropped that down to there 104 55. That's where the last point at which the low had traded up to the close. So buyside liquidity has been delivered. Here it's
78 00:15:53,730 --> 00:16:05,130 all sellside liquidity at this moment here, it's all sell side now nothing over here until we get over here. So we created a gap down here. Price trades up hits
79 00:16:05,130 --> 00:16:24,420 it here hits it here, we could be a seller at 104 55 or one and 450 looking for move down below 104 15 One 410. And there's your run right there.
80 00:16:25,710 --> 00:16:43,020 Perfect delivery of price hits it here hits it here. Look at the high on that candle 104 55 145. The low on this candle 104 35. the buy side all green candle
81 00:16:43,050 --> 00:16:53,700 up, then it comes down to this is all efficiently traded. It's a full block of deliberate efficiency. Up and down both ranges on both sides of the delivery of
82 00:16:54,000 --> 00:17:04,320 price to buy in the sell side of an offer and then here from this low to this high. Once we break this low here, we're all on sell side now. comes right back
83 00:17:04,320 --> 00:17:16,380 to it here. Perfect delivery efficiently priced at one and forth 55 Does it twice time to sell it off and wait for it to run to sell stocks below this low
84 00:17:16,950 --> 00:17:32,460 and this low down here and a Cisco line on it so you can see there and last delivery boom. Perfect. It's a perfectly delivered down into the cell stops
85 00:17:32,880 --> 00:17:45,390 below the low lows. So hopefully this has been a little bit more insights into how the liquidity pools and liquidity voids. And February gaps draw together in
86 00:17:45,390 --> 00:17:55,920 overlapping scenario. But again, there'll be a lot more scenarios to outline in your PDF file for this summer's content. So wish you good luck and good trading