ICT Traders: You're Trading FVGs Wrong! (Edgeful)
Summary
TLDRIn this video, the speaker explains how Fair Value Gaps (FVGs) vary across timeframes, challenging common beliefs in trading. Using statistical data from EdgeFull software, the speaker reveals that smaller timeframes, particularly the 5-minute gaps, are more likely to be mitigated and should be prioritized over larger gaps like the 30-minute or 15-minute ones. By focusing on these higher-probability setups, traders can improve their entries and align with the algorithm's behavior. The video debunks myths about timeframes and emphasizes the importance of understanding which FVGs to trade for better success.
Takeaways
- 😀 Time frames in trading are not equal, and the algorithm behaves differently depending on the time frame.
- 😀 Fair value gaps (FVGs) are not all the same in terms of importance or likelihood of being mitigated.
- 😀 The larger the time frame, the more traders believe the fair value gap is significant, but this is often incorrect.
- 😀 The 30-minute fair value gap has only a 50% chance of being partially mitigated, which means it's not a high-probability entry.
- 😀 When looking at the 15-minute time frame, the chance of a fair value gap being mitigated increases to 60%.
- 😀 The 5-minute fair value gap has a 75% chance of being wicked into, making it a stronger draw for price action.
- 😀 Traders should focus on 5-minute fair value gaps for entries rather than relying on the 30-minute or 15-minute time frames.
- 😀 Even though the 5-minute fair value gap is a stronger draw, it only gets fully closed 64% of the time, with a wick being more likely.
- 😀 The market behaves fractally, meaning certain behaviors can repeat across different time frames, but not all gaps are of equal importance.
- 😀 The Edgefull software provides insights into trading strategies and statistics for niche strategies like fair value gaps.
- 😀 In trading strategies for index futures, Forex, metals, energies, and crypto, the key is understanding the relationship between time and price.
Q & A
What is the significance of understanding time frames in trading with fair value gaps?
-Time frames are crucial when trading fair value gaps because the market algorithm behaves differently on different time frames. Not all time frames are equally significant, and some are more likely to produce reliable results than others.
How does the algorithm behave on different time frames according to the video?
-The algorithm operates differently on various time frames. Larger time frames may appear significant, but smaller time frames, like the 5-minute gaps, can show stronger price movements and be more reliable for trade entries.
Why are 5-minute fair value gaps considered more important than 15-minute or 30-minute gaps?
-5-minute fair value gaps have a 75% chance of being wicked into, making them more likely to influence price movement compared to 15-minute (60%) or 30-minute (50%) gaps. This higher probability makes 5-minute gaps a stronger draw for price action.
What does it mean for a fair value gap to be 'fully mitigated' or 'wicked into'?
-A fair value gap is 'fully mitigated' when the price completely closes the gap. It is 'wicked into' when the price only briefly touches the gap without closing it fully.
What percentage of 30-minute fair value gaps are fully mitigated according to the report?
-According to the report, only 30% of 30-minute fair value gaps are fully mitigated, meaning the price completely closes the gap in only 3 out of 10 cases.
What does the video suggest about using social media claims regarding fair value gap strength?
-The video debunks the common claim on social media that larger time frame fair value gaps (like 30-minute) are stronger. It shows that smaller time frame gaps, like the 5-minute, are more likely to draw price action and be mitigated.
How does the Edgefull software help traders analyze fair value gaps?
-Edgefull provides statistics and data on obscure but powerful trading strategies, such as fair value gaps. It allows traders to customize reports and analyze different time frames to identify which fair value gaps are most likely to be mitigated.
What is the percentage of 15-minute fair value gaps that are mitigated?
-15-minute fair value gaps have a 60% chance of being mitigated, which means the price closes the gap in 6 out of 10 cases.
What does the term 'fractal' mean in the context of market behavior?
-In the context of market behavior, 'fractal' means that the market exhibits similar patterns or behaviors across different time frames, though not all time frames are equally significant in predicting price movements.
What can traders do with the data provided by Edgefull regarding fair value gaps?
-Traders can use the data provided by Edgefull to identify which time frames and fair value gaps are most likely to result in price movements, allowing them to make more informed decisions and improve their trading strategies.
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