Trading with order blocks (OB) and fair value gaps (FVGs) is a strategy often employed by traders who focus on price action and market structure. Order blocks refer to areas on a price chart where institutional orders have previously moved the market significantly, indicating potential areas of interest for future trades. Fair value gaps are price voids that occur when there is a significant price move, creating a gap between the opening price of a current bar and the closing price of a previous bar, which traders believe will eventually be filled.
To trade using OBs, traders usually identify key order blocks on a higher time frame, marked by clustered candlesticks that show significant market rejections or consolidations. With FVGs, traders often look for these gaps to be revisited by price action for potential entry points, aiming to take advantage of the momentum when the market fills the gap.
When utilizing these techniques, many traders emphasize careful risk management and back-testing their strategies to ensure a clear understanding of how these patterns play out under various market conditions. The overall effectiveness of trading with OBs and FVGs will significantly depend on the trader’s ability to interpret the market context, integrate these techniques with other analysis methods, and apply disciplined risk management practices.
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