How to Trade FVG Forex for Profit: A Beginner's Guide

Forex traders often find pinpointing entry and exit points challenging when prices swing violently. However, the Fair Value Gap (fvg forex) technique can help solve this problem. This article will explain what FVG is and how to apply it in real trading.

What is FVG Forex and How Does It Work?

Fair Value Gap, or simply FVG, is a price gap that appears on the chart when the price moves rapidly and significantly. This gap occurs because the market jumps over a price range without any trades happening within it, often during low liquidity periods such as market open or close.

Many traders see FVG as a magnet that pulls prices back. This means prices tend to revisit and fill these gaps later, providing clear trading opportunities to assess entry and exit points.

FVG Structure

FVG consists of 3 candles moving in the same direction. The gap forms between the wicks of the first and third candles. The second candle is called Imbalance, which acts as the driver of the gap.

This imbalance indicates that large buyers or sellers placed orders simultaneously, causing the price to jump over levels without orders. This situation often attracts the price to return and fill the gap afterward.

When Does FVG Occur?

Common Causes

Unexpected news events, such as company earnings announcements or interest rate changes, can trigger intense buying or selling surges.

Institutional trading: When banks or funds buy or sell large amounts of securities simultaneously, prices often spike up or down sharply.

Market open/close periods: FVG frequently occurs during Friday market close and Monday open due to accumulated news over the weekend.

Low liquidity: At market open or close, fewer orders can push prices significantly.

Upward and Downward FVG

Bullish FVG (

Consists of three green candles in a row. Prices often retrace downward toward the FVG and then bounce back up. This signals a continuing bullish trend.

How to read: Highest point of the first candle = lower boundary of FVG / lowest point of the third candle = upper boundary of FVG.

) Bearish FVG ###

Consists of three red candles in a row. Prices often retrace upward toward the FVG and then drop back down. This indicates a continuing bearish trend.

How to read: Lowest point of the first candle = upper boundary of FVG / highest point of the third candle = lower boundary of FVG.

Advantages of Using FVG in Trading

✓ Clear entry and exit points: Gaps serve as reference zones that make decision-making easier.

✓ Applicable across all timeframes: From minute charts to yearly charts, offering flexibility for various trading styles.

✓ Easy to learn: Even beginners can quickly grasp the basic concepts.

✓ Works across multiple markets: Stocks, commodities, crypto, and more.

✓ Concrete results: When setting clear exit points, traders can better manage risk.

Limitations and Risks

⚠ Price may not always revisit the gap: Sometimes gaps are filled or disappear, making this a less reliable signal.

⚠ Requires multiple indicators: FVG should not be used alone. Combine with support/resistance levels or other technical indicators.

⚠ Volatility risk: Like other techniques, gaps can be filled with unpredictable movements.

How to Trade Using FVG in 3 Steps

( Step 1: Determine Market Trend

The most important thing is to know the market direction. If prices are making higher lows = uptrend )focus on buying###. If prices are making lower highs and lower lows = downtrend (focus on selling).

( Step 2: Identify Support and Resistance Zones

In an uptrend, focus on support zones where buying interest is high. In a downtrend, focus on resistance zones with strong selling pressure. Ensure FVG is above/below these levels.

) Step 3: Set Stop Loss and Profit Targets

For long entries, place stop loss below support zones and target the next resistance zone. For short entries, place stop loss above resistance zones and target the next support zone.

Tips to Increase Success Chances

Use multiple indicators: Combine FVG with RSI, MACD, or moving averages to improve accuracy.

Always set stop losses: Essential for protecting your capital.

Wait for market confirmation: Before entering, observe if the price moves in the direction of the gap.

Be mindful of timing: Trading timing is crucial. Be patient and wait until the price reaches the FVG under suitable conditions.

Choose high-liquidity zones: Avoid gaps near previous day’s highs or lows. If the gap is in such areas, wait for liquidity to return and cause price movement again.

Summary

Fair Value Gap ###fvg forex### is a valuable tool for chart analysis and identifying trading opportunities. By understanding what FVG is and how to use it correctly, traders can significantly increase their profit potential.

However, the most important thing is not to rely solely on FVG. Combining it with other tools like support/resistance analysis, technical indicators, and proper risk management will make your trading strategy more effective.

Continuous practice and patience in waiting for the right opportunities will lead to success in the challenging world of Forex trading.