Orderblock Or Fair Value Gap Which Is Best For Taking Trades

Summary

In this video, Solomon King delves into how traders can effectively identify whether price will react from an order block or a fair value gap. He explains essential trading concepts such as market structure, liquidity, and institutional reference points, with practical tips for using different time frames. By focusing on key levels, analyzing volume, and observing shifts in market structure, traders can make more informed decisions and reduce risk. The video also emphasizes the importance of aligning with the market trend and understanding the behavior of institutional players.

Takeaways

• 😀 The main challenge for traders is determining whether price will react from an order block or a fair value gap (FVG).
• 😀 Traders should use multiple time frames (daily, 4-hour, 1-hour, 15-minute) to analyze the market for better trade entries.
• 😀 Understanding market structure (uptrend, downtrend) is crucial in selecting the right points for trade setups.
• 😀 Order blocks and fair value gaps are key institutional reference points that guide trade entries.
• 😀 A drop in volume during a retracement indicates that the momentum of sellers is weakening, signaling potential buy opportunities.
• 😀 Price may not always reach an order block; sometimes, it will react from a fair value gap before reaching the order block.
• 😀 Watching for shifts in market structure (such as break of structure and lower lows) helps in determining trade entries.
• 😀 When price reaches a fair value gap, observe the behavior of the market; an aggressive bullish candle can signal a reversal in direction.
• 😀 Volume analysis is a powerful tool to confirm whether the institutions are backing a move, especially in confirming the direction of price action.
• 😀 Focus on the discount area for bullish trends, as institutional reference points located there are more reliable for entry.
• 😀 Backtesting these concepts on your own will help improve your ability to identify trade setups and minimize risk.

Q & A

What is the main topic of the video?

The main topic of the video is how to effectively select the correct price action zone, specifically whether to trade from an order block or a fair value gap (FVG) in trading.

What are order blocks and fair value gaps in the context of trading?

An order block refers to a key candlestick pattern that represents an institutional reference point, which can often be used for entry in a trade. A fair value gap (FVG) is a price imbalance or gap between two candlesticks, often leading to price retracement before continuing in the prevailing trend.

Why do many traders struggle with selecting between an order block or fair value gap for trade entries?

Many traders struggle with selecting between these two because, at times, the price might react to a fair value gap before it reaches the order block, leading to missed trades or higher risk exposure when deciding on where to place stop losses.

How does the concept of structure, institutional reference points, and liquidity relate to trading?

These concepts are essential in ICT (Inner Circle Trader) methodology: Structure refers to the overall market trend, institutional reference points are key areas like order blocks and FVGs where price might react, and liquidity represents areas where buy or sell stops accumulate, often influencing price movements.

What role does the time frame play in trading as described in the video?

The time frame helps traders identify the broader trend and manage entry points. The video highlights the use of daily, 4-hour, and 1-hour time frames to analyze market conditions, structure, and potential points of interest for trade entries.

How do you determine whether to focus on the order block or fair value gap?

The decision is based on market conditions and price action. If price retraces into a fair value gap and shows a shift in market structure (such as a break of structure), it may signal a valid entry. The fair value gap is prioritized when it aligns with the discount area of the market, as it provides a better risk-to-reward setup.

Why is the concept of volume important when analyzing price action?

Volume is crucial because it indicates the strength or weakness of a price move. In the video, it is shown that a drop in volume during a retracement suggests that the momentum of sellers is fading, signaling a potential shift in market behavior as the Bulls take over.

How can you use market structure shifts to identify entry points?

Market structure shifts occur when the price breaks previous highs or lows, signaling a change in trend direction. A shift, such as a break of structure from lower lows to higher highs, indicates that the market is likely to continue in the new trend direction, providing a clear entry point for traders.

What is a breaker block, and how does it help in identifying trade entries?

A breaker block is an area of price where an earlier trend reversal took place, creating a significant reference point for future price action. It helps traders identify potential areas for re-entry after price retraces back to it, offering low-risk, high-reward opportunities.

How can beginners benefit from the YouTube channel mentioned in the video?

The YouTube channel created specifically for beginners will focus on simplifying ICT concepts. It will cover everything from foundational concepts to advanced strategies, helping new traders understand key concepts such as structure, liquidity, order blocks, and fair value gaps in a structured, easy-to-understand way.