All language subtitles for Lesson 6 - Fair Value Gaps

Welcome back books and teaching
number six of eight for the

ICT mentorship, December, 2016.

Content we're gonna be
dealing specifically with the

reinforcing of fair value.

And it's a concept of
trading inside the range.

Okay.

What does a fair value gap?

It is a range in price delivery where one
side of the market liquidity is offered

and typically confirmed with the liquidity
void on the lower timeframe charts.

In the same range of pricing price can
actually gap to create a literal vacuum of

trading, thus posting an actual price gap.

Okay.

Let's take a look at a
Euro dollar daily chart.

Okay.

And I'm going to ask you, where do you
see an example of the fair value gap?

Okay.

I'm going to draw your attention to it.

Here is that blue shaded area here.

On the daily chart.

Can we explain to you why I'm shading
in that specific area of price?

It's about a 20 PIP range on the daily,

but inside of that blue shaded area,
that is what is commonly referred

to in my work as a fair value gap

to take a look at what makes.

That gap so significant as you can
see here, the candle to the left

of the down candle, we're looking
at it comprises the fair value gap.

That's this candle here.

Okay.

And to the left of that, we have the
higher bearish candle and I'm drawing

attention to the fact that it has a
down close, but it's come off the.

Okay.

So we're looking at the low up to the
clothes, that little wick in there.

If you take that same range.

Okay.

And you look at our down
candle that created that fair

value gap on the daily chart.

Uh, that range between fit a 1
0 5 15 to approximately 1 0 5

big figure inside our downtown.

And in this candle here, that's
highlighted from the low to the close.

That price range has been
treated up into once already

delivering the buy-side liquidity.

In other words, on this candle is low up
to the close price had come off that low.

So if it came off that load to have
a higher close on that candle, that

means the buy-side liquidity had been
offered on that range between 1 0 5 15.

To one of five big figure.

So that means when we look at the down
candle that makes the fair value gap.

We're not concerned with the 1 0 5 15
to 100, five big figure price range.

So we're going to drawing our attention
to that low here, and we'll draw

that out in time, but let's now look
at the other candle that frames our

fair value gap, the next area at
which we see buy-side liquidity.

Is from this green candle or up close
candle to the right of our down Canada.

That makes the fair value gap.

The open to the high on this candle
has offered buy-side liquidity as well.

So we have seen price
offered on the up movement.

For buy-side liquidity on two candles,
one to the left of our fair value

gap, creating down candle on the
daily chart and one candle to the

right of it, where we saw price move
higher in portion of that down candle.

So we have a range left, that's open, and
it specifically is this area right here.

So we're delineating the low of the
previous candle and the high of the

counter, the right of the down candidate
creates that little pocket of space.

So between 1 0 5 big figure
down to 1 0 4 75, about 25 pips.

That is our fair value gap.

And it's been left open.

There's been no trading
outside of the movement.

Range, except for that down candle and
no up movement at all on this timeframe.

Now, when we're looking
at fair value gaps.

Okay.

It's important to remind you that if we're
studying a specific timeframe, the gap

occurs on the timeframe you're looking at.

You can break this down further
into smaller timeframes, but in

the smaller timeframes, you'll
probably end up seeing illiquidity.

Where the gap would be indicated here on
this team, timeframe on a lower timeframe.

It would many times appear as a liquidity
void where it's multiple candles

that create that open space of range.

Okay.

So now we have our daily chart here.

We have our specific levels in mind.

And the two little line segments
delineating one candles low,

and one candles high in between
those two reference points.

We have that big down candle
in the exposed area in between.

That is the fair value gap that only the
sell side liquidity has been offered.

So imagine that paint brush analogy
I've used many times in the past, on the

down candle that creates the lowest low.

There's a range with the candle before
it and the candle after it, where it has

left a pocket of poorest price action,
or only delivered on the downside.

We're going to expect price to
eventually want to trade back

up into that little gap area.

So this area in here, that's what
we're looking to see it fill in.

That's the nature of a fair value.

So when we look at price and
we're zoomed in a little bit, now

here, we're at a four-hour chart.

Okay.

And you can see the two
specific price levels.

Again are Dylan.

He is well, and we have a low Delaney
is for potential liquidity run on

sell stocks below the low price.

Does in fact go down below that previous.

And well, now we can expect to
see what form of turtle soup or a

false break below an old low, why
would be reasonably expected to

go back up to fill in that gap?

Well, because we've already taken the
sell side liquidity out by running an

old, well, we have equal highs here,
delineated also on our chart on the

four hour basis and right above those
equal highs, we have our fair value.

Eventually price does in fact, trade
back up close to the fair value gap

in that trade, or that idea is now
complete while it doesn't look like a

great deal of money or pips offers, it's
a very highly profitable and probable

condition in the marketplace where
we can see these fair value gaps and.

Double-talk whereby sauce
will be resting above it.

And if you see a turtle soup run below an
old well, you're in a range this time of

the year, going into the end of the 2006
trading year, uh, going into the holidays,

uh, trading is going to be range-bound.

And when you're in a range and
consolidation type format or profile

for the marketplace, this is a style
trading you want to be doing, looking for

stops and looking for fair value gaps.

So it was well over a hundred pips over.

And it only took about two days to
complete that little price swing.

And in fact, this range of price
action in the form of a fair value

gap was actually detailed to you.

In the beginning of this week, we
delineated on the daily chart, the

fair value gap as outlined here.

And on the daily chart, you can
see it's been filled in here.

So while there's a lot of information
about fair value gaps and breakaway

gaps and measuring gaps, that's
going to be coming your way in the

form of the December study notes.

Um, just understand that everything has
been shown here is reversed for buy-side

liquidity runs, where the market will
come back and closing a fair value gap.

That's below the marketplace to seek,
to fill in the sell side liquid.

I want to take a quick
look at something else.

Cause I mentioned, um, that the gaps
fair value gaps, liquidity voids,

order blocks, and liquidity pools.

They kind of overlap a lot in
a lot of different ways that

you're probably not aware of yet.

And that's what the
benefit of having the PFO.

Uh, study notes and also in the
supplementary teachings, that's

going to happen next week, Monday
through Friday, a lot more away

from live trading in live sessions.

With the ICT mentorship, you will be
getting a daily video supplementing

these specific techniques and
concepts for the month of December.

So to help.

Really dial in on the concepts going
forward so that we are prepared and

primed for the content for January, 2017.

But I want to take you back over to the
charts and I'm gonna give you something

by way of understanding the overlap of
liquidity voids and fair value gaps.

Okay.

Folks, we're looking at at 1 0 4 75 level.

I have the charts trained
in on a five minute.

Your double.

And we're seeing the very moment at that 1
0 4 75 level was pierced here on the 19th.

Is it the second time?

It trades through that one to 4 75 level.

And I want to just draw a special
attention to this area up here.

Okay.

And now I'm going to show you
what it looks like when we have a.

Uh, run above an old high, which
is what, this is one of the 4 75.

It's also run on liquidity in
the form of a liquidity pool.

So it's running by stops, but also
it's hitting their fair value gap also.

So it's trading into
the fair value you get.

And I said on the lower timeframes, many
times, this will create a liquidity.

You see a movement lower
here on this candle.

And then we have another candle here.

Look what happened.

Next candle is open is down here.

So you have this gap in here
to press trades up into that

and closes that in right there.

See that price Dan moves lower.

Significant break, lower

ended, lower

ultimately trading through

to where the cell stops
were mentioned earlier.

Okay, let's take a look at
it on a 15 minute basis.

Here's the first time it trades
up ended at 1 0 4 75 level

closing that fair value gap.

And then here's the second
time it trades up into it.

We're running out the previous high.

The previous high, this
time was at 1 0 4 77.

This candle's high comes in at 100, 4 78.

So trades to it.

And just by one PIP.

Now, watch the difference here.

We have a down candle here, a
lot of movement lower, but then

it comes off that low watch.

What happens now?

We gap we get from this candles
close one in 4 72 to an opening

on this candle of one to four 70.

Now it's only two pips difference,
but that creates a what again.

So we can be a seller at a more refined
price level mentioned an earlier time.

We said that we could be a seller
at 1 0 4 71 a limit when price

trades back up to that level.

If it doesn't give us an opportunity
to go on a limit, we can treat

it right as it hits it live.

It can be in front of
the charts right there.

There's yourself.

Now here's the thing.

Look at the bodies.

On this candle right here,
the close is 1 0 4 72.

That's exactly the high on this candles.

Close one in 4 72, the wick trades
through the body, but the bodies of

the candle completely closed in here.

So this gap between these two candles,
these two black down candles, this gap

in between the bodies have perfectly
being filled in with this up candle.

So this is exactly what I'm
referring to as efficiency in

terms of the price delivery.

If this movement lower has
been offered on the downside.

Okay.

Now think, look closely.

This candle is high.

Comes in at 1 0 4 78.

The close is at 1 0 4 75.

The next candle it opens at one to 4 76.

I'm sorry, one of 4 74.

And then it creates a hot.

At 100, 4 76.

So it moves two pips up.

So from the opening to the high
is buy-side liquidity offered.

Then it trades down for a down close.

Then we gapped down here.

There's a gap of buy-side
liquidity from these two candles

from this candles opening.

That's exactly where this price goes on.

The upside from the open to the high, the
open is one of 4 63, the highest 1 0 4 7.

Which is the opening here?

1 0 4 74.

That's the last point at which
the buy-side liquidity is offered

on the up movement, then it's
all down from the opening.

It fills in that perfect
delivery, a price right there.

And then at that moment, when you see this
live, you can be a seller at that moment

in price.

Does exactly.

We mentioned earlier when we were
looking at the hard timeframe,

this delivery here, price from this
candle is low up to the close by side

was offered here and buy-side was offered
from the opening to the high here.

So there's a gap closure here when
all of the downside movement here.

So this has all been
closed in so efficiently.

We could look for this
range being delivered lower.

We have to consider back here where
price was delivered on the buy-side here.

So this low comes in at 1 0 4 55.

So he dropped that down
to there one to 4 55.

That's where the last point at which
the low had traded up to the close.

So buy-side liquidity
has been delivered here.

It's all cell side liquidity
at this moment here.

It's all sell side.

Now, nothing over here
until we get over here.

So we created a gap down here.

Price trades up, hits it here.

It's at here.

We could be a seller at 100, 4 55 or
one in four 50, looking for a move

down below 1 0 4, 15 to one to four 10.

And as you run right there,
perfect delivery of price.

It's it here hits it here.

Look at the high on that candle.

1 0 4 55, 1 0 4 55 to low on this candle.

1 0 4 55, the buy-side
all green candles up.

Then it comes down.

So this is all efficiently traded.

It's a full block of deliberate
efficiency up and down.

Both ranges on both sides of the
delivery of price, the buy and

the sell side have been offered.

From this low to this high, once we break
this low here, we're all on sell side.

Now comes right back to it here.

Perfect delivery and
efficiently priced at 104 55.

Does it twice time to sell it
off and wait for it to run.

The cell stops below this low and this
low down here on a Cisco line on it.

So you can see

there.

What's the delivery.

Boom.

Perfect.

Sit perfectly delivered down into
the cell stops below the low lows.

So hopefully this has been a little bit
more insights into how the liquidity pools

and liquidity voids and Fairbury gaps do
all together in an overlapping scenario.

But again, there'll be a lot
more scenarios to outline in your

PDF file for the summers county.

So I wish you good luck and good trading.