Stop Guessing ENTERIES – Order Blocks vs FVG Simplified for 2025 | PRICE ACTION

Summary

In this video, the presenter breaks down two powerful price action tools—Fair Value Gaps (FVG) and Order Blocks. The video explains the key differences between them and how each tool can be used to identify high-probability setups. The presenter demonstrates practical examples, shares strategies for trading with both tools, and discusses the importance of aligning with market trends. Ultimately, the presenter shares their personal preference for using Order Blocks over FVGs, based on performance and reliability. This insightful guide helps traders enhance their understanding and improve their trading strategies.

Takeaways

• 😀 Fair Value Gaps (FVGs) and Order Blocks are two powerful price action tools, and understanding the difference between them is crucial for successful trading.
• 😀 A Fair Value Gap (FVG) identifies an imbalance between buyers and sellers in the market, which often leads to a price movement in one direction.
• 😀 FVGs are created when there is a gap between the wicks of three consecutive candles, and these gaps can appear in varying sizes within a price move.
• 😀 A good risk-to-reward ratio is essential for identifying profitable trades using FVGs. It’s important to set stop loss and take profit targets strategically.
• 😀 Traders should avoid entering a trade in the middle of an FVG if the risk-to-reward ratio is unfavorable. A lower time frame may help refine the entry.
• 😀 In the case of multiple FVGs within a single price movement, focus on FVGs in the 'discount zone' (below the 50% retracement level) for a higher probability of success.
• 😀 Order Blocks are areas where major market momentum decisions are made, and they can provide more precision than FVGs alone when used together.
• 😀 Order Blocks come in various sizes, and small order blocks may require additional space, while larger order blocks may require confirmation through lower time frames.
• 😀 When combining FVGs and Order Blocks, traders should align their trades with the overall market trend, as this increases the chances of success.
• 😀 High-probability setups are identified by considering the market trend, breaking structure, and gathering liquidity before entering a trade.
• 😀 The personal preference of the video creator is to use Order Blocks over FVGs, as they tend to offer better trading opportunities based on backtests.

Q & A

What are fair value gaps (FVG) and order blocks in trading?

Fair value gaps (FVG) refer to areas between the wicks of three consecutive candles where there is an imbalance between buyers and sellers. Order blocks, on the other hand, are the candles that cause an imbalance in the market, marking significant supply and demand zones. Both tools are used to identify potential trading opportunities in price action.

How can a trader identify a fair value gap (FVG)?

A fair value gap (FVG) is identified as an area between the wicks of three consecutive candles. Traders can recognize different sizes and numbers of fair value gaps within a single price movement, and use these gaps to analyze market imbalance and potential entry points.

What is the importance of the 50% level in fair value gap (FVG) analysis?

The 50% level of an impulsive move is significant because it marks the distinction between a discount zone (below 50%) and a premium zone (above 50%). Traders prefer to trade within the discount zone as it tends to offer higher probabilities for success due to market dynamics, including eliminating early buyers and offering more favorable entry points.

Why do traders prefer to trade in the discount zone instead of the premium zone?

Traders prefer the discount zone because it typically offers better entry points with a higher likelihood of success. In the premium zone, prices are often considered overextended, and early buyers are more likely to be trapped by liquidity. Therefore, waiting for price to enter the discount zone helps reduce risks.

How do order blocks differ from fair value gaps (FVG) in terms of reliability?

While fair value gaps are powerful tools for identifying imbalances, they can be less reliable when used alone. Order blocks, however, offer a more precise tool by highlighting key supply and demand zones where price action is likely to react. They are considered more reliable for predicting potential market movements.

What role does market structure play in identifying high-probability setups with FVG and order blocks?

Understanding market structure is crucial because it helps determine the market’s direction. By identifying whether the market is trending up or down, traders can align their entries with the prevailing market trend, which increases the likelihood of a successful trade when fair value gaps and order blocks align with the trend.

How does the break of structure affect trading decisions with FVG and order blocks?

A break of structure occurs when price moves past a previous level, signaling trend continuation. This break provides confirmation for traders to take positions, especially when it aligns with fair value gaps (FVGs) or order blocks. These breaks are often used to identify where momentum is building and to spot high-probability entry points.

What is the significance of liquidity zones in relation to FVG and order blocks?

Liquidity zones, such as support and resistance areas, are crucial because they influence price movements. Traders need to identify these zones as they represent areas where the market may experience a reversal or breakout. By recognizing liquidity zones before they are swept, traders can position themselves to capitalize on price movements that occur afterward.

Why are smaller order blocks preferred over larger ones in trading?

Smaller order blocks are preferred because they offer clearer, more reliable entry points with a higher chance of price rejection. Larger order blocks, on the other hand, require traders to switch to lower time frames to refine their entries and ensure better risk-to-reward ratios.

Why does the trader prefer order blocks over fair value gaps (FVG)?

The trader prefers order blocks over fair value gaps because order blocks provide more precision in identifying key supply and demand zones. While fair value gaps are useful, they are sometimes less reliable on their own. Order blocks offer better confirmation when price reacts to these zones, increasing the likelihood of a profitable trade.