Displacement creates imbalances — these are Fair Value Gaps. What they are, how they form, and why they work as a confluence zone across almost every style of trading.
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Displacement creates imbalances. These are referred to as FVGs. They are areas of interest to add to a position when market structure and trend are supporting the idea. An FVG is usually coupled with an order block (or several).
In the example below, here is an FVG created after taking out a major yearly SSL (sell-side liquidity). Once we have displacement, the next thing to look for on the chart is an order block.
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Recall that an order block is an area where you want to buy or sell. In this scenario, the market structure shift (MSS) is to the upside — so this order block and FVG are showing us where we can go long. Targets for the long are the recent swing highs.
An imbalance is an area where we have an incomplete auction of buyers and sellers. There are orders left waiting to be filled within it. So the FVG is an area of liquidity for buyers and sellers to transact and complete their orders.
Direction comes from the analysis of liquidity and MSS — the FVG is just an area where we know price can eventually retrace back into.
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In this example, the narrative shifts from shorting the highs to now awaiting an opportunity to go long — the order block and the FVG sit in the same zone, and that overlap is the confluence.
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FVGs are described as an imbalance where orders have been left behind, pending. If the narrative for price is higher, we look for signs of confluence to add long in an FVG — and vice versa for shorts. That confluence shows up across almost every style of trading:
EMA Traders
EMA traders use their specific EMA system to add into a trend. Chances are, this is exactly where the FVG overlaps.
Support & Resistance Traders
S/R traders add near support — this is where the FVG and order block structure usually sets up the entry.
Supply & Demand Traders
Supply and demand traders like to add in their zones. This is where order blocks and FVGs provide entries.
Order Flow Traders
Order flow traders look for bullish or bearish flow at specific areas to confirm the trend — this is where FVGs are most likely to be.
Heatmap / Order-Size Tools
Tools like heatmaps that illustrate order sizes at specific levels also tend to overlap with FVGs and order blocks.
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I personally like to use volume price analysis with an ICT foundation to add my positions inside FVGs and near order blocks. Direction is derived from liquidity analysis across multiple assets — this is a more advanced layer on top of the core concept above.
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At the end of the day, the market is there to provide liquidity. Our only job is to understand where price is trying to go, and how we can enter the trend at a discount.
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Educational Content
This lesson describes a trading concept and how it is analysed. It is provided for informational and educational purposes only — it is not a signal service, a specific rule-based system, or an investment recommendation of any kind.
Not Financial Advice
Nothing in this document constitutes financial, investment, legal, or tax advice. Any decision to apply these concepts to real or simulated trading is made entirely at the reader’s own discretion and risk.
Trading Risk
Trading futures, foreign exchange, and other leveraged products carries a high level of risk and may not be suitable for all investors. It is possible to lose some, or all, of an initial investment — do not trade with money you cannot afford to lose. Chart examples shown are for illustration only and do not guarantee similar outcomes in live markets.
No Performance Guarantee
Past chart examples are not indicative of future results. No representation is being made that applying this concept will, or is likely to, achieve profits or avoid losses.
Your Own Responsibility
Anyone reviewing or applying this concept should independently evaluate it, test it thoroughly (e.g. on a demo account), and consult a licensed financial professional before risking real capital.
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Fair Value Gap (FVG) — Lesson 4, internal reference document, not for redistribution as investment advice.