Smart Money  (5/6)

Notes:

These indicators and concepts are specifically designed for TradingView.com

Settings and Indicator

Go into INDICATORS and type in Smart Money Concepts

SMC in Indicators

Go into Settings and follow these settings

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How they form

Fair value gaps are observed when imbalances in the pricing of securities, resulting in the formation of areas of support and resistance. These gaps typically emerge during periods of heightened volatility, such as after a market breakout or retest, and represent a disparity between the fair value of an asset and its current market price.

How to Identify Fair Value Gaps

In order to identify what a fair value gap is, look for a huge candle body like the one shown in the picture, then, draw a rectangle with its base being at the highest point of the previous candle's upper wick and with its top being the lowest point of the following candle's lower wick. Now, extend the rectangle to the right and now you have a fair value gap. Here is an example below plotted on TSLA on the 4hr time frame.

Bullish FVG (if it was bearish the box would turn red)

How to trade

To trade, wait for the price to hit the line in the middle of the FVG which is shown in the fair value gap. This midline of the FVG acts as a support, and the price can bounce off of it and conversely for bullish FVG. For an entry, wait for the price to react to the fair value gap, and, if the volume decreases while this is happening you can enter a long.

Other concluding remarks

Just keep in mind that we want to wait for price to react to the FVG and trade it the same way we trade conventional support and resistance. If extending a rectangle horizontally until the price reaction helps, then do that process.

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