FVG Forex is - The key to Forex trading for beginners

FVG Forex is a price gap that occurs on the chart when the price moves rapidly and skips over a price range without any trading, creating a clear “gap” on the chart. This is a market weakness that smart traders use as a tool to generate income. In this article, we will delve into what FVG Forex is, why it’s important, and how you can leverage it.

What is FVG Forex? A Gap Traders Must Understand

Fair Value Gap, or simply FVG, is an easy yet effective concept in Forex analysis. As the name suggests, FVG is the gap between the natural fair value of an asset and its current price, which the market often “fills” shortly afterward.

This gap results from heavy buying or selling pressure, causing the price to jump over a range without much competition at the middle price. Traders see FVG as a magnet for price action, expecting the price to return and fill the gap later. This presents a golden opportunity for trading, whether you’re a beginner or an expert.

Structure of FVG: 3 Candles That Change the Game

To truly understand what FVG Forex is, you need to know what components make it up.

First Candle: The initial move in either direction—up or down.

Second Candle: The “key”—an imbalance candle indicating an impending FVG. Usually small or slightly reversing.

Third Candle: A strong continuation in the same direction as the first candle, causing the price to jump over and create a clear gap.

The gap between the first and third areas is the FVG you’re looking for. This is the zone where the price is likely to return.

When Does FVG Forex Occur? 5 Situations You Must Know

1. Unexpected News

Before the market reacts, the price may spike sharply up or down, skipping over large price ranges—such as better-than-expected earnings reports or interest rate announcements.

2. Major Economic Data

Release of unemployment figures, inflation data, or central bank policy changes often create FVGs.

3. Large Buy/Sell Orders

When big institutions (banks, funds) place large orders, the price can change rapidly.

4. Market Open/Close

At market open or close, low liquidity can cause sudden jumps.

5. Weekend Gaps

Between Friday close and Monday open, news can generate large FVGs.

Types of FVG – Bearish and Bullish

Bearish FVG

Formed by three consecutive red (or down) candles. The gap tends to be filled as the price drops back down.

How to read:

• Low of first candle = top of FVG
• Second candle = imbalance candle
• High of third candle = bottom of FVG

Bullish FVG

Formed by three green (or up) candles. The gap is usually filled as the price moves up.

How to read:

• High of first candle = bottom of FVG
• Second candle = imbalance candle
• Low of third candle = top of FVG

Advantages of Trading with FVG

• Clear Entry and Exit Points: FVG provides straightforward entry points and targets, reducing guesswork.
• Works on All Timeframes: From 5-minute to daily charts.
• Applicable to Various Assets: Forex, stocks, commodities, crypto—all markets have FVG.
• Reliable Results: Clear gaps often lead to predictable outcomes.

Disadvantages to Watch Out For

• Not All Gaps Fill: Sometimes FVGs remain unfilled; the price may go elsewhere.
• Use with Other Tools: Don’t rely solely on FVG—combine with Moving Averages, MACD, trendlines, etc.
• Risk of Loss: Like all trading, there’s risk. Proper Stop Loss placement is essential.

How to Trade with FVG in 3 Simple Steps

Step 1: Determine the Trend

First, analyze the chart: “Is the price going up or down?”

• Higher lows = Uptrend → Look for Bullish FVG to buy
• Lower highs = Downtrend → Look for Bearish FVG to sell

If unsure, check higher timeframes (4H, daily).

Step 2: Find Support and Resistance Zones

Once trend direction is clear:

• Uptrend: Find support zones; wait for price to retrace into FVG for buy entries.
• Downtrend: Find resistance zones; wait for retracement into FVG for sell entries.

Step 3: Set Stop Loss and Take Profit

This is crucial:

• Stop Loss: Place outside the FVG, opposite to your trade direction, to limit losses.
• Take Profit: Set at the next support/resistance level aligned with your trade.

Tips to Increase Your Winning Chances

Use Multiple Indicators

Don’t rely solely on FVG. Combine with:

• Moving Averages
• MACD
• RSI

Using multiple tools increases accuracy.

Wait for Market Confirmation

Don’t trade FVG just on the gap alone. Wait for clear market signals, such as strong candles or volume spikes.

Trade in High Liquidity Conditions

Avoid trading during low liquidity (e.g., late at night). Good liquidity ensures smoother price movements.

Time Your Entry Well

FVG is a tool that benefits from timely entries. Avoid rushing into trades before confirmation.

Monitor Market Environment

Check for major news or events before trading. High volatility can invalidate FVG setups.

Summary

FVG Forex is a powerful tool for identifying profit opportunities in the Forex market when combined with other technical analysis techniques. The potential profits can exceed expectations.

Many traders have achieved success using this method. The key is:

• Deep understanding of what FVG is
• Consistent practice with demo accounts
• Discipline to follow your trading plan

Successful Forex trading requires knowledge, patience, and discipline. FVG is just one of many effective tools to help you identify good entry points and turn statistical advantages into real profits.

Warning: Forex trading involves high risk and may not be suitable for everyone. Practice with demo accounts and further study before trading with real money.