EXPLAINED: A Bearish Fair Value Gap (FVG) - Smart Money Concepts for TVC:SA40 by Timonrosso (2024)

FAQs

What is the FVG in smart money concepts? ›

A fair value gap, also known as an imbalance or FVG, is a crucial idea in Smart Money Concept that sheds light on the dynamics of supply and demand for a particular asset. This phenomenon occurs when there is a significant disparity between the number of buy and sell orders for an asset.

A bearish Fair Value Gap is created when there is a gap between the low of the first candle and the high of the third candle. Fair Value Gaps represent a kind of anomaly, an imbalance in the market, a situation where the price has deviated from fair value.

For example, if GDP growth is lower than expected, this could cause the market to gap down. Large institutional trades: Large institutional trades can also lead to FVGs. For example, if a large hedge fund is buying a large number of shares of a stock, this could cause the market to gap up.

For example, a trader might identify a fair value gap that has formed at a Fibonacci retracement level, which could indicate that the market is about to reverse course. This information can then be used to develop a trading strategy that takes advantage of the potential reversal. Helps manage trader risk.

The SMC approach aims to understand how smart money creates market structure and supply and demand zones, and by studying these characteristics, traders can buy when smart money buys and sell when they sell, making sure they are profitable.

Smart money is cash invested or wagered by those considered experienced, well informed, “in the know,” or all three. There is little empirical evidence to support the notion that smart-money investments perform better than non-smart-money investments; however, such influxes of cash influence many speculation methods.

For example, if a fair value gap is created in a move to the upside, traders would wait for the price to be pulled down toward the fair value gap and enter a long position with the goal of profiting from a continued move to the upside once the imbalance is cleared out.

Gap up is when a stock's opening price is higher than the previous day's closing price; gap down is when it's lower than the last day's closing price. Gap up signals: Bullish sentiment - Indicates strong buying interest.

FVGs can be identified through technical analysis involving the analysis of candlestick patterns and price chart patterns. Traders can categorize FVGs into two types: Undervalued FVGs, where prices are lower than fair value, and Overrated FVGs, where prices are higher.

The Fair Value Gap, or FVG, is a widely utilized tool among price action traders to detect market inefficiencies or imbalances. Sometimes you will even see them labeled as inefficiencies by other traders.

What is an example of a value gap in marketing? ›

An example of a value gap is when a company advertises a product as “world-class” but customers who purchase and use the product find it to be of average quality.

Example 1: Gap Call Option

Let's say K1 = 100 and K2 = 105. This would mean that the trigger price exceeds the strike price. If the trigger price is less than the strike price for a gap call option, negative payoffs are possible.

A Bearish Fair Value Gap is a 3 candle structure with a DOWN impulse candle (2nd) that indicates and creates an imbalance or an inefficiency in the market. WHAT DO THE IMBALANCES TELL US? These imbalances tell us that the buying and selling is not equal.

The ratios form the support or resistance levels in Fibonacci Retracement analysis. The important levels are 61.8% (a_n-1 / a_n), 38.2% (a_n-2 / a_n), and 23.6% (a_n-3 / a_n). There are other important levels like 78.6% and 50%, which are not Fibonacci ratios but are nonetheless important.

The Fibonacci sequence and the Golden Ratio are mathematical concepts that can be applied to financial markets for technical analysis. Traders use Fibonacci retracement levels to identify potential support and resistance levels where an asset's price may find a floor or ceiling after a significant move up or down.

The Fair Value Gap, or FVG, is a widely utilized tool among price action traders to detect market inefficiencies or imbalances.

Fair value gaps can become a magnet for the price before continuing in the same direction. On a chart, a fair value gap appears in a triple-candle pattern when there is a large candle whose previous candle's high and subsequent candle's low do not fully overlap the large candle.

A Bullish Fair Value Gap is a 3 candle structure with an up impulse candle (2nd) that indicates and creates an. imbalance or an inefficiency in the market. WHAT DO THE IMBALANCES TELL US? These imbalances tell us that the buying and selling is not equal.

A Break of Structure (BOS) in trading refers to a scenario where the market surpasses a previous peak in an uptrend or falls below a previous bottom in a downtrend, indicating the continuation of the current trend. It serves as a signal that the momentum is still in favour of the prevailing trend direction.