Understanding Market Imbalances: The Core Concept
The video starts by defining the foundational concept that explains all types of gaps: imbalanced price action. The key idea is that when price moves too quickly through a zone, leaving an imbalance, it will likely return to "balance out" that action. This principle applies to all the gap types discussed.
1. Fair Value Gaps (FVGs)
These are the most common imbalances. The video explains them as a three-candlestick pattern where a gap exists between the wick of the first candle and the wick of the third candle. For a detailed look at candlestick anatomy, refer to ICT for Dummies EP1: Candlestick Basics, Anatomy & Patterns Explained.
- Bullish FVG: A gap between the first candle's high wick and the third candle's low wick. Price is expected to pull back to fill this gap before continuing higher.
- Bearish FVG: A gap between the first candle's low wick and the third candle's high wick. Price is expected to rally up to fill this gap before continuing lower.
Key Takeaway: An FVG is a confluence, not a trade signal. It requires a proper daily bias and context to be effective. The video shows multiple real-chart examples of price returning to fill these gaps before resuming its trend. For a deeper dive into this concept, read Understanding Fair Value Gaps in Trading: A Comprehensive Guide.
2. Inverse Fair Value Gaps (iFVGs)
An iFVG is created when price fails to respect a standard FVG and closes through it.
- Example: A bullish FVG is formed, but instead of price pulling back to fill it and going up, it closes below the gap. This invalidates the bullish setup and indicates a shift in momentum.
- How to Use Them: The instructor treats iFVGs as confirmation of a trend change, similar to a break of structure. It serves as an early warning that the existing order flow is disrupted.
Real-world application: The video shows how an iFVG can signal a change in directional bias before a major liquidity sweep or break of structure occurs. To master this technique alongside market maker context, explore Mastering Fair Value and Market Maker Perspectives in Price Action.
3. New Day & New Week Opening Gaps
These are simple but powerful imbalances that the instructor notes are rarely discussed. They occur when a market session closes and the next one opens at a different price.
- What They Are: A gap between the close of a daily/weekly candle and the open of the next one.
- What They Do: Price almost always seeks to fill this gap immediately, often within the first few candles of the new session.
- Visual on Chart: The video shows examples on the weekly chart where the wick of a new weekly candle reaches down to fill the gap from the previous week's close.
4. Candle Gaps
These are the smallest-scale imbalances, occurring on lower timeframes like the 1-minute chart.
- Definition: The gap between the close of one candle and the open of the next.
- Practical Use: While not typically used as a standalone trade trigger, understanding these gaps helps explain short-term price movements and why price wicks or reverses at certain levels.
Final Summary
The video concludes by emphasizing that imbalances are the root cause of many price movements. By identifying these gaps, whether FVGs, iFVGs, or opening gaps, traders can better predict where price is likely to go. The goal is not to trade every gap, but to understand the underlying mechanics of why price moves the way it does. For a structured learning path, consider the Curso Gratuito de Trading: Conceptos Clave de ICT.
if you've been looking for a no BS guide on Fair Value gaps this is it I'm going to simplify all the stuff that ICT talks
about in his mentorship or my boot camp that you didn't really understand the first time I pretty much use this
strategy every single day so you guys can see in my trade Recaps I'm using this consistently so let's get in the
charts get ready to lock the [ __ ] in let's learn some [ __ ] all righty so first thing that we're going to do is
just talk about fair value gaps and honestly I want to talk about imbalances in general because this is a video that
is going to cover a lot of [ __ ] that I haven't talked about before on my YouTube channel you're probably thinking
tjr another fair value Gap video you've made eight videos on Fair Value Gap so far there's two parts in like the very
first time that you were on YouTube you've made three parts on the boot camp and you made two parts on the trading
transformation well guess what there's more okay so I'm going to be talking about imbalances as a whole on top of
fair value gaps we're going to be talking about New Day opening Gap new week opening Gap candle gaps and inverse
fair value Gap on top of fair value gaps as a whole so the first thing that we want to do is understand what imbalances
are it's imbalance price action and you're probably saying hey you can't use the definition of a word that's already
in it shut up okay this is an English class we're here to learn some [ __ ] okay so when we think about what does
imbalance even mean it means price isn't balance out so what is price likely going to want to do to imbalance price
action balance it out fill in that imbalance price action and that's pretty much what all of these imbalances are
right that's why we call them imbalances okay so fair value gaps candle gaps new day opening gaps new week opening gaps
and inverse fair value gaps are unbalanced price action that price is likely going to draw back in towards so
that we can form either executions based off of that daily buyas based off of that and I'm going to show you guys what
all of these things are on the chart right now so first thing that I want to cover is obviously fair value gaps this
is like the most typical one that you guys hear about when we say oh there's an imbalance on the chart everyone's
like just going to assume that it's a fair value Gap okay so what does a fair value Gap consist of a fair value Gap is
a three Candlestick pattern I'm going to go ahead and Picasso this [ __ ] it's a three Candlestick pattern one candle in
the middle that I'm kind of doing this [ __ ] off the dome but I like to call it kind of like the extension candle or the
candle that really makes the Gap happen so in order for a fair value Gap to be a fair value gap or to have an imbalance
you'll typically see this all the time on the chart you'll see hey in this case this is a bearish fair value Gap we see
that hey this Wick from the first candle doesn't cover up the top wick on the third candle and we see that there's a
gap between these two candlesticks okay so we can see that within here there's a lack of buy orders okay why because this
candle was able to swiftly move straight through this price range okay so now with that in mind we know that price was
able to swiftly move past this price range and there's a lack of buy orders so what is price going to want to do to
this imbalanced price action it's going to want to balance it back out fill in that imbalance price action fill more
sell orders so price price can what move further to the downside plain and simple super easy you guys have seen this all
over the place right now let's show bullish fair value gaps it's the same exact thing but just in the other
direction again fair value Gap three Candlestick pattern you guys have probably seen me explain these so many
times so I'm going to go through fair value gaps a little bit quicker than all the other ones because you guys are
pretty familiar with this concept right again bullish fair value Gap it's a three Candlestick pattern how do we know
that it's a valid fair value Gap we look at the top Wick of the first candle over to the bottom Wick of the third candle
let's say this Wick's pubic hair just goes a little bit longer what's that going to look like is that a fair value
Gap didn't think so boom okay we need some Gap work like someone's got a big ass gap between their teeth and you
can't stop staring at it that's how you guys should be staring at fair value gaps we want to balance out that price
action okay so boom we take it from the top Wick of the first candle to the bottom Wick of the third candle and
don't worry we're going to go in the chart and show you guys what this actually looks like on real candlesticks
instead of my beautiful paintings of them and what is price likely going to want to do to this imbalance price
action where there's a lack of sell orders it's going to cause price to want to push right on down there balance out
price action fill more buy orders to make price do what push up higher cool cool now let's show this on the actual
chart and the awesome thing about this is these show up on every single time frame so that's the way that I teach my
[ __ ] all of my confluences they show up on every single time frame time frame they're applicable on every single time
frame okay so whether you're trading on the 4 Hour the daily 15 minute 5 minute 1 minute whatever it may be so without
further Ado what do we see right here big extension candle big imbalance of price so what is price going to want to
do it's going to want to balance out price action so what do we do we take it from the top Wick of this first candle
up to the bottom Wick of this candle mink draw that right out boom price balances out price action and price
continues higher right we see the imbalance get filled another example right here what do we have balance price
action big dick of a candle to the upside take boom from the top Wick of the first candle to the bottom Wick of
the third candle what does price do balance out that price action continues a little bit higher okay and you're
probably saying well tjr what the [ __ ] happened on this bearish fair value Gap dum dum it was supposed to go down lower
well that's the thing our confluences are nothing without context and bias so if you guys are having trouble like
saying hey I take a short on every single bearish her value Gap all right right let's settle down you're not
trading correctly okay you guys need bias and you guys need context for the trades that you guys are taking so again
this video is just covering imbalances as a whole understanding the concept understanding why we're even able to
classify these as confluences in the first place so that we can Implement them in our trading make sure you guys
have a good understanding of how to find daily bias make sure you guys have a good understanding of how to execute for
just jumping right in and being like B I'm going to take trades off of this so boom that's fair value gaps now let's go
ahead and talk about inverse fair value Gap we're going to jump right in here and you're probably thinking what is a
inverse fair value Gap is it the opposite of a fair value Gap is it when the pubic hairs of the Wicks actually
touch together inverse fair value Gap is when we have a fair value Gap where we essentially invalidate the fair value
Gap to the upside okay so here boom this is a bullish fair value Gap but what do we see with this next candle doesn't
necessarily have to be the exact next candle it can be several candles afterwards and again I'll show you guys
several examples of this outside of my Picasso painting but I just just want to draw this out for you guys so you guys
can have a better view of it okay so boom we have a bullish fair value Gap and we're expecting for price to do what
to come in here balance out price action see buy orders to the upside and continue up but then what happens we get
the opposite of that and price ends up closing underneath the fair value Gap so that turns this into an inverse fair
value Gap and how do I treat inverse fair value gaps I'm not necessarily looking to use these as confluences I
like to call inverse fair value gaps more of like confirmation so I use inverse fair value gaps super similar to
break breaks of structure again this is something that can tell me before a break of structure even happens that hey
our bullish order flow like in this example is getting disrupted and isn't getting respected so in turn what is
that going to make me do that's going to change my bias of the overall trend within the market so right here we have
a nice little bearish fair value Gap right here right we see price boom dick and balls pattern straight to the upside
rip work right closing significantly Above This fair value Gap freaking dead on right this is like crazy work Edge
during pre-market nut right when Market opens boom we close above this a fair value Gap is still valid if we Wick to
the bottom of it and Wick past it so see right here on this bullish fair value Gap this still gets respected right if
we closed underneath it it would turn into an inverse fair value Gap however it was just a wick to the Downs so we
see the price close above here and also on top of that it is breaking structure to the upside but again we could have
treated this if we didn't break structure to the upside as if it was a break of structure to the upside as
confirmation more examples of this will go down into a lower time frame I've shown several examples of this too on my
trade Recaps so if you guys haven't watched those I highly suggest you do let's go ahead and like just draft this
up as if we're looking to take a trade okay so here's Market open I remember this day I was bullish we had a draw in
liquidity right here okay let's scale down even lower the lower time frames so look we come down we sweep liquidity
okay let's say we missed all of this right we start to see price retracing okay we see a slight retrace what do we
have within it here A bunch of bullish fair value gaps right could have been taking trades off that okay but on top
of that what do we see we have a bearish fair value Gap right here and if price wanted to continue this retrace what
would have it done it would have pushed into it it would have balanced out price action and it would would have continued
lower but what did price do price closed Above This bearish fair value Gap and continued bullish price action and price
goes higher and higher let's show one more example of this boom here's a beautiful example right here we see
sweep of of liquidity boom break of structure boom on top of that how do we know that right after this Candlestick
that the overall direction of the trend is going to change until we can take out significant liquidity by this
confirmation right here of this inverse fair value Gap boom this is a bullish fair value Gap that should have gotten
respected and it didn't we get a closure underneath price what does it do seeks out to fill boom this imbalance and take
out this draw on liquidity take out this draw on liquidity and all these other draws on liquidity all the way down here
here so boom inverse fair value gaps done again if you guys want a more super duper duper in-depth of me like talking
out exactly how to draw these things out on the chart I already got a video on it in the trading transformation fair value
gaps there's 10 of those [ __ ] by me all over the place now we're getting into some [ __ ] that I haven't talked
about before on this channel which is New Day opening gaps new week opening gaps and candle gaps which is actually
pretty exciting so right here we'll actually talk about new week opening Gap we'll start off here right here is when
the week close for whatever reason this week closed on Thursday my guess is that there was a bank holiday on Friday okay
but regardless boom this week closes right here then what does the new week do it opens up here with that in mind
this is a imbalance what do we know about imbalanced price action price is going to want to balance out imbalanced
price action so we know within this price range this is imbalanced price action so what can we kind of do we can
kind of treat this as a fair value Gap what do we know about imbalanced price action price is going to want to see
seek out and fill that imbalanced price action damn near immediately so what do we see price do we get a little leg up
right when the new week opens and then boom We immediately draw into that new week opening Gap we can kind of see it
as like a draw on liquidity because price really wants to fill in those imbalanced price ranges okay so that's
an example of new week opening Gap we can go to the weekly chart and just spot these super easily by just plain and
simple seeing where the previous weeks close and where the new weeks open all of these you will see for a fact
is filling these in so boom right here this is where the previous week closed this is where the new week opened I
don't even have to go into on the chart because we can see the price action through the wick of the Candlestick we
can see price at some point in time during this week wanted to fill in this imbalance price action we closed right
here on the previous week and we opened on this week right here but we see that little snail Trail of the wick that
shows that we filled in this imbalanced price action and then price continued up again same thing here we have this this
week's close the next week week's open is a little bit higher we know that this imbalanced price action was filled in
purely based on this candle's Wick another good example boom this week's candle close see this week it wanted to
be bullish but what did it have to do it had to fill in this imbalanced price action it's this is something that's
super important that is really beneficial for you guys to keep in mind that barely anybody [ __ ] talks about
on the internet on YouTube and the same thing applies to days okay so again we can see [ __ ] is like clockwork bro look
at this this day closes here this day opens here what is it going to want to do boom we see a wick to the downside
what did it do fill in this imbalanced price action same thing right here candle close right here candle open
right here what is price going to want to do fill in the imbalance price action get me like are we starting to
understand how every single time we have a different close and a different open we are typically going to come through
and fill in price action candle close candle open what do we do fill in the imbalance price action okay we got it
new day opening Gap covered what are they they're imbalances price is going to want to seek out those imbalances and
balance out price Action Now last but not least we can talk about candle gaps okay and candle gaps are essentially new
week opening gaps and new day opening gaps but just on smaller time frames than the daily and the weekly so again
it's the same situation we typically see this happen pretty often on the one minute time frame do I use these that
often and do I necessarily use like new week opening Gap and new day opening Gap all the time not necessarily but again
what am I here to do I'm here to teach you guys how to be good Traders I'm here to teach you guys how to understand
price action to its fullest and I felt like with me only making a video on Fair Value gaps and me only making a video on
inverse fair value gaps it's doing you guys a disservice because there's other imbalances out there okay so boom this
is a perfect example again it's on the one minute and it's hard to like again again are are we likely going to be
taking trades off of this no but do we want to understand why price moves the way that it does absolutely so we can
see this candle closes right here this candle opens right here it doesn't immediately just go up what does it do
fills in imbalan price action okay let's find another example boom right here this candle closes candle opens what
does it need to do boom fill in imbalance price action like a broken record at this point so there you guys
have it pretty much covered everything there is to imbalances fair value gaps iners fa value gaps new day opening Gap
new week opening Gap and candle gaps so if you guys really [ __ ] with this video I'm glad thank you guys for trying
to mix and match the content you know a little bit of like chart work and a little bit of me in front of you guys
and the camera like talking to you guys so if you guys enjoyed this drop a [ __ ] like subscribe and on top of
that I just filmed a video doing a similar type of filming setting of how I made $6,000 in literally under an hour
on how I found my daily bias how I found the high you know like good area price range to look to execute within and how
I executed in order to make that money in order to hit take profit so if you guys want to see that video link will be
wherever up here go and [ __ ] click that okay and then on top of that if you guys want to learn all about this [ __ ]
you guys can look at the boot camp you guys can look at the trading transformation or even better if you
guys don't want to get beamed with ads and [ __ ] I put the best videos from the trading transformation the boot camp all
together into a literally free course even those those are already for free on YouTube but I know you guys hate giving
me money so boom I'm going to put it in the description for absolutely absolutely free no ads I appreciate you
guys for watching peace out
The foundational concept is that any time price moves too quickly through a zone, leaving an imbalance, it creates a
A bullish FVG is a three-candlestick pattern where a gap exists between the wick of the first candle's high and the third candle's low. This gap acts as a draw for price, which is expected to pull back and fill that gap before continuing higher.
An inverse FVG occurs when price closes through a standard FVG instead of respecting it. For example, in a bullish FVG, if price closes below the gap, it invalidates the bullish setup and signals a shift in momentum. Traders treat iFVGs as confirmation of a trend change, similar to a break of structure.
These gaps form when a market session closes and the next one opens at a different price, creating an imbalance between the close and the open. They are powerful because price almost always seeks to fill this gap immediately, often within the first few candles of the new session, making them a key forecasting tool.
Candle gaps are the smallest-scale imbalances, occurring between the close of one candle and the open of the next on lower timeframes like the 1-minute chart. While not standalone trade triggers, understanding these gaps helps explain short-term price movements and why price wicks or reverses at specific levels.
No, an FVG is a confluence zone, not a trade signal. To be effective, it must be used with a proper daily bias and market context. The video emphasizes that traders should not trade every gap but instead use them to understand the underlying mechanics of price movement.
The main takeaway is that imbalances are the root cause of many price movements. By identifying these gaps, traders can better predict where price is likely to go—whether it’s filling a gap, reversing at a zone, or confirming a trend change. The goal is to understand the mechanics of price action, not to trade every gap.
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