ICT Fair Value Gaps Explained: What You Need to Know
In trading, especially using ICT (Inner Circle Trader) concepts, The ICT Fair Value Gap (FVG) represents price inefficiencies that smart traders can exploit. They are essential for understanding where the market might move next. These “gaps” also indicate institutional involvement, which is always good as as ICT traders our goal is to trade in the same direction as Smart Money.
What Are Fair Value Gaps (FVGs)?
A ICT Fair Value Gap occurs when there’s a price imbalance between buyers and sellers. It appears on a chart as a gap between consecutive candles, usually on smaller timeframes. This gap signals areas where price moved too quickly, leaving unfilled orders.
Why Do FVGs Matter?
FVGs act as magnets, attracting price back to fill these gaps. Institutional traders often use them to anticipate retracements, which provides opportunities for high-probability trades. On lower timeframes, inside these gaps may be considered “Turtle Soups”, another of ICT’s concepts, which are basically runs on liquidity.
How to Identify Fair Value Gaps:
- Spot an Impulse Move: Look for strong, rapid movements in one direction.
- Check for Gaps: Identify the space between the wick of one candle and the body of the next.
- Wait for Retracement: Price often returns to fill these gaps before continuing its trend.
Practical Trading Example:
Let’s say you spot a bullish impulse. If the next few candles leave a gap, mark that area. When price retraces into the gap, it’s a potential entry point towards a target, which
Conclusion:
Understanding FVGs is crucial for any trader using ICT concepts. These gaps not only highlight market inefficiencies but also offer valuable clues for future price movement.
For more information the ICT Concepts and the creator you can visit his website HERE.
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