Order blocks and fair value gaps are concepts used in technical analysis to identify potential areas of support and resistance, and to gauge the likelihood of price continuation or reversal. An order block is essentially a consolidation area before a significant price move, suggesting institutional buying or selling. A fair value gap (FVG) is a three-candle pattern where the high of the first candle is lower than the low of the third, or vice versa, creating a "gap" in price action that price is likely to revisit. Combining these concepts helps traders identify high-probability trading opportunities.

When It Helps

These tools are most useful in trending markets. Identifying an order block within a trend helps pinpoint areas where price is likely to find support (in an uptrend) or resistance (in a downtrend). The fair value gap acts as a magnet, suggesting price will eventually move to fill the inefficiency. Using them together provides confluence; if price bounces off an order block and heads toward an unfilled FVG in the direction of the trend, it strengthens the case for a trade. They are less effective in choppy, sideways markets.

How To Try

While no built-in indicator perfectly identifies these, you can manually mark them on charts using tools available on platforms like TradingView.

• Identify Order Blocks: Look for consolidation areas (small-bodied candles) preceding strong directional moves. Mark the last down candle before an up move (bullish OB) or the last up candle before a down move (bearish OB).

• Identify Fair Value Gaps: Find three consecutive candles where the high of the first is lower than the low of the third (bearish FVG) or the low of the first is higher than the high of the third (bullish FVG).

• Watch for Confluence: Look for price retracing to test an order block and then moving towards an unfilled FVG in the direction of the prevailing trend.

Key Settings

There are no specific "settings" since these are identified visually. However, consider these factors:

• Timeframe: Higher timeframes (e.g., daily, 4-hour) generally provide more reliable signals than lower timeframes.

• Candle Size: Order blocks are more significant when the preceding price move is substantial.

• Volume: Confirm the strength of the move out of the order block with above-average volume.

Tips & Risks

Trading based on order blocks and fair value gaps requires discipline and consistency. Avoid FOMO (fear of missing out). Wait for clear confirmation signals.

• Risk Management: Always use stop-loss orders to protect your capital. Place stops below bullish order blocks or above bearish order blocks.

• Patience: Not every order block or FVG will result in a successful trade. Be selective and patient.

• Psychology: Don't force trades. If the setup isn't clear, wait for a better opportunity. Remember, losing trades are part of the process.

Quick Checklist

• Identify order blocks on higher timeframes.

• Locate unfilled fair value gaps.

• Confirm confluence between order blocks and FVGs.

• Use stop-loss orders to manage risk.

• Practice patience and avoid FOMO.