They could not work at all and you could have 10 winning trades in a row with it. That’s how statistics work.
Come back with 10k trade algotested to reaffirm your claim.
Mica said:
They could not work at all and you could have 10 winning trades in a row with it. That’s how statistics work.
Come back with 10k trade algotested to reaffirm your claim.
FVGs are just another tool in the shed to get the job done. It isn’t the end-all be-all. People who denounce FVG and reversal patterns simply don’t know how/when to use them.
@Amani
I never said they are useless or do not work. It’s just that you can’t make a claim based on some trades you took; this has 0 statistical value.
Mica said:
@Amani
I never said they are useless or do not work. It’s just that you can’t make a claim based on some trades you took; this has 0 statistical value.
Through my experience and other traders outside of Reddit, apparently they work for entries and take profits.
Most retail traders fail to understand the true nature of patterns because they focus only on the obvious shapes without understanding the mechanics behind them. Patterns like head and shoulders or double tops are not significant because of their appearance, but because they reveal key liquidity dynamics, absorption zones, and institutional execution processes. These formations are the byproduct of smart money engaging in liquidity sweeps, rebalancing inefficiencies, and executing large orders. Without understanding these drivers, you are essentially blind to the actual intent behind price movement.
Markets are highly structured systems designed around liquidity. Institutions are not trading patterns; they are exploiting inefficiencies, filling liquidity voids, and mitigating risk. To understand this, you need to grasp how algorithms are programmed to optimize order flow, how liquidity pools like stop clusters are targeted, and how price is manipulated to unlock liquidity and trigger imbalance corrections. Patterns are simply the visual residue of these processes, not the processes themselves.
A fair value gap is one of the clearest examples of institutional activity. It represents an inefficiency in the market where aggressive order flow moved price so quickly that opposing liquidity could not fill. This creates an imbalance, leaving areas of untraded price that act as liquidity voids. You typically see these as gaps between candles where no wicks overlap, indicating price skipped levels where buyers and sellers could interact. These gaps often align with areas where institutions entered aggressively or where price failed to fully rebalance, making them high-probability zones for price to revisit.
The creation of fair value gaps is rooted in institutional trading behavior. Large players do not execute their orders all at once. They layer their trades to avoid moving the market against their own positions. During moments of high volatility or low liquidity, such as news events or major market opens, these large orders can overwhelm available liquidity, causing price to shoot away and leave inefficiencies behind. However, markets are always seeking equilibrium, so price tends to return to these gaps to fill orders and rebalance.
Not every fair value gap is meaningful, and their importance depends on context. The first factor is market structure. If the market is trending upward, gaps below the current price often act as support, while in a downtrend, gaps above price are likely resistance. These areas align with the flow of liquidity, making them more likely to be targeted. Second is proximity to key liquidity zones. Gaps near significant swing highs, swing lows, or known liquidity pools like order blocks (just a silly buzzword for a supply or demand level) or stops are more relevant because they align with institutional targets.
The size and clarity of the gap are also critical. Large and well-defined gaps indicate strong institutional activity and are more likely to be revisited. Small or poorly defined gaps that are isolated or lack alignment with other liquidity zones are less significant and unlikely to attract price. To identify the fair value gaps that matter, you need to think like an institutional trader. Look for where liquidity sits, where stops are stacked, and where imbalance corrections are likely to occur.
At the end of the day, fair value gaps are just one tool in understanding institutional behavior. The real edge comes from seeing how these inefficiencies align with the broader market narrative. If the gap reflects a point where institutions would logically engage, such as mitigating exposure, targeting stops, or rebalancing, it becomes a highly actionable area for trading. This is how you stop chasing random patterns and start trading the intent behind price action.
@Oaklan
I did read through it and appreciate the response. This is basically what I was saying to others that responded.
@Oaklan
Wow, you sure do sound like Fractal Pro. Are you by chance a former student of his? Always a great sight to see someone who approaches trading like this, man I’d definitely want to pick your brain on some things along the lines of institutional engagement and intents behind price action, if you’d like at least.
Wonderful take, man, love it.
@Oakley
No, I’ve never had a mentor, never taken a course, and I’ve never heard of Fractal Pro. But go ahead and ask whatever you like. If this topic caught your interest, I can share a response I wrote on a different post. I think it offers some worthwhile insights on the matter.
'When you’re observing a range, what you’re really seeing is institutional desks working their book. They’re either warehousing risk, accumulating inventory, or offloading it. Consolidation zones aren’t random, they’re deliberate, engineered phases to either accumulate liquidity or unload positions without moving price too far and tipping their hand. Retail traders, of course, treat these ranges like playgrounds, placing stops on the obvious swing highs and lows. Those stops are the liquidity pools institutions exploit to facilitate large order flow.
Now, figuring out which direction price is likely to break comes down to understanding order flow dynamics and liquidity profiling within the range. One of the biggest tells is the distribution of volume. If you’re seeing higher tick volume on the bid during pullbacks within the range, that’s indicative of resting passive buy-side interest, institutions accumulating inventory. Conversely, if the offer is dominating with higher volume during minor upswings, it’s a sign of distribution, unloading into strength. This is often paired with absorption at key levels, repeated testing without a decisive move usually hints at larger players stepping in to defend their positions.
The stop-hunting behavior is critical here. It’s not just retail stops; it’s also about institutional liquidity resting just beyond these zones. For example, if price sweeps the lows of the range, triggering a liquidity run, but there’s a rapid recovery with minimal follow-through, you’re likely looking at a liquidity injection. Someone’s filled their bid stack and is ready to drive the market higher. The inverse applies for highs; a liquidity sweep that fails to hold above signals distribution and a potential move lower.
ATR compression within the range is another key input. Tight ranges inherently reflect reduced volatility, but the timing of volatility expansion tells you a lot. If ATR begins to pick up during tests of one boundary, pay attention. Subtle volatility expansion often preempts the actual breakout direction. However, a sharp volatility spike on a false breakout, say, a run above resistance that gets sold into aggressively, is often a trap, designed to clear liquidity before a reversal.
If you have access to execution data or footprint charts, you can get even more granular. Look at delta imbalances near the edges of the range. Persistent absorption, high positive delta on a resistance test that doesn’t break, or negative delta at support that holds, is a strong signal that liquidity is being absorbed, setting up for a reversal. Cumulative delta divergence with price within the range is another great tool. If delta is trending higher while price remains static, there’s hidden accumulation underway.
Lastly, you need to consider higher timeframe context. Consolidation in the middle of a higher timeframe structure is more likely to act as a continuation. But if the range is sitting at a key inflection point, let’s say just below a weekly supply zone or above major support, it’s more likely to resolve against the trend. You have to overlay the range dynamics with the broader market narrative.
In short, it’s about combining volume patterns, delta shifts, liquidity sweeps, ATR dynamics, and structural context to identify where the real move is likely to occur. Each of these elements tells part of the story, but the full picture comes from understanding how institutions execute in size without moving the market unnecessarily.’
@Oaklan
Man, hahaha, I love this. Let’s connect for real. What you are saying confirms some thoughts I have been having but didn’t get concrete on them enough. Haha, fake gurus have ruined these elements in the process of selling dreams, speaking of smokes and mirrors, claiming to know institutional levels way back from the 60’s. Man, I already sent you a DM. Let’s connect further. So glad I read your response and glad you did spend the time to send it even when you probably had the thought it will go over people’s head or no one would regard it as anything. Looking forward to a connect, brother. This is interesting.
@Oakley
Yep, trading is a magnet for charlatans. The nature of the game makes it tough to prove or disprove the effectiveness of a strategy in any meaningful way, let alone in court.
Add to that the global aspect of it. People from all corners of the world are involved, and suing across borders is neither easy nor cheap. Most won’t bother.
These folks primarily rely on a tried-and-true hustle: know just enough to outpace the average person, then package and sell that ‘knowledge’ as gold.
P.S.
Funny thing is, at first, I thought this might actually challenge people a bit. But when the OP of the post I replied to came back with, ‘Valuable info, thanks, man,’ it was crystal clear what I was dealing with, lol.
You can have a broken clock but if you only look at the time twice a day, you’ll think it’s a working clock.
Point being, your sample size is likely not large enough to make any meaningful conclusion on the functionality of FVGs compared to other methods.
@Brett
Price always comes back to FVG. They don’t always happen right away, but they do happen. You can use them for entries and take profits.
It’s concept. They might work; they might not. It’s more like it’s highly likely to happen but not definitely will happen. It could be price hit the order block. You never know, and it’s not 100% because of FVG or whatever astronomy you can think of. It’s just a possibility.
@Whitney
Yes, nothing is 100% in trading. But I believe people who don’t believe in reversal patterns or FVG simply don’t know how to use them.
I love when noobs watching YouTube think they cracked the market with a publicly known strategy.
Arlo said:
I love when noobs watching YouTube think they cracked the market with a publicly known strategy.
I don’t know how you got this from my caption, but okay, lol.
Do you basically trade off of trendlines? Like, if price taps and then rejects off the trend line, you enter?