Been diving deep into price action lately, and I keep coming back to this concept that honestly changed how I approach the markets. It's called a Fair Value Gap, and once you start seeing them, they're everywhere.

So here's the thing about fair value gaps - they're basically those zones where price moved so fast that the market left behind an imbalance. Think of it like supply and demand getting out of sync. When you get a massive candle that rips in one direction, it often leaves a void that price eventually comes back to fill. That's your gap right there.

The way I spot them is pretty straightforward. You're looking for that aggressive candle - could be one big one or a sequence - that creates a space with no overlap between candles. Usually happens during trending markets or after some major news event hits. Crypto and forex are especially prone to these since volatility is always high.

What makes a fair value gap so useful is that it acts like a magnet. Price has this weird tendency to revisit these zones and "fill" the imbalance. I've noticed they work best as dynamic support or resistance depending on context. They're not just random - they're actual high-probability setups if you know what you're doing.

Here's my approach when I'm actually trading these:

First, patience is everything. Don't chase the gap the second you spot it. Wait for price to come back and show some confirmation - a reversal pattern, a bounce, something that tells you the market is reacting to that zone.

Second, I always layer in other tools. Moving averages, trendlines, Fibonacci levels - if your fair value gap aligns with something like a 50% Fibonacci retracement, that's when you know you've got something solid. The more confluence, the better.

Third, trade with the trend. In an uptrend, you want gaps acting as support. In a downtrend, you want them as resistance. Fighting the trend is just asking for trouble.

For entries and exits, I'm specific. Entry at the gap zone when price shows reaction, stop loss just outside the gap to keep risk tight, and take profit at the next logical level or a measured move. Risk management is non-negotiable - never more than 1-2% per trade.

I've seen traders make two big mistakes here. One, they overtrade every gap they see. Not all gaps are created equal - be selective. Two, they ignore what the market's actually doing. A fair value gap in a choppy, sideways market isn't the same as one in a clean trend.

The beauty of understanding fair value gaps is that it gives you an edge by showing you where the market's likely to revisit. Combine it with solid risk management and you've got something worth trading. That's been my experience anyway.