FVG Trading Strategy Unveiled: Seize the Gold Mine Left by Institutional Funds

Trading markets are a daily battlefield of capital games. When large funds enter, they cannot consume all liquidity at once; instead, they rapidly push prices up or down, leaving behind one “gap” after another. These gaps are the Fair Value Gaps (FVG), which are also the easiest spots for retail traders to be targeted—and equally the easiest places to profit from.

What is a Fair Value Gap (FVG)?

Imagine this: the price suddenly jumps from point A directly to point C, completely skipping over point B. The area around point B that was skipped is the FVG.

The specific structure is as follows:

• First candle: decline
• Second candle: strong rally (institutional entry)
• Third candle: slight pullback or doji
• Result: a gap forms between the high of the first candle and the low of the third candle

This gap indicates market imbalance. Large funds have bought a lot, but their orders haven’t all been filled yet. The price will eventually come back to fill this gap.

Why do large funds come back to fill the gap?

When big funds want to build a large position, they face a dilemma: buying all at once pushes the price up, causing significant losses. The simple solution—divide into batches.

They first push the price aggressively to create panic (everyone wants to buy), then pull back to fill low-priced orders (buy more themselves). During this process, they inevitably return to the previously skipped price zone.

This is why FVGs are called “magnet zones”—the price is like being attracted by a magnet, always returning.

How to apply FVG? Practical five-step method

Step 1: Confirm the trend
Start by looking at higher timeframes (4-hour or 1-hour charts) for market structure. Is it bullish or bearish? Are there breakouts (BOS or CHoCH)?

Step 2: Mark the FVG area
Identify three-candle patterns within the trend. The second candle should be strong, and there must be a clear price gap between the first and third candles. Mark it with a rectangle tool.

Step 3: Be patient
FVGs won’t be filled immediately. Sometimes it takes hours, sometimes days. Set price alerts and monitor when the price approaches.

Step 4: Look for confirmation
When the price enters the FVG zone, don’t rush to enter. Switch to lower timeframes (15-minute or 5-minute charts) to find entry signals—engulfing, ascending triangles, or other reversal candles.

Step 5: Precise order placement

• Entry: upon confirmation candle or at the upper boundary of the FVG
• Stop-loss: below the FVG or the nearest swing support
• Take profit: at previous highs, equal highs/lows, or liquidity zones

Winning combinations with FVG

FVG + Market Structure = High Win Rate

When an FVG appears after a breakout during impulsive moves, this signal is strongest.

Example: Price breaks previous high (BOS), forming an FVG during the rally. Then, the price retraces into the FVG area, and a buy signal appears on a lower timeframe. Enter here, targeting the next resistance or liquidity zone.

Success rate can increase to over 70%.

FVG + Order Block = Double Resonance

If your FVG is near or inside an order block (OB), the reliability of the trade greatly increases.

Why? Because:

• Order blocks are major accumulation zones for big funds
• FVGs are imbalance zones
• Combining both = the path institutional players must take

FVG + Liquidity Sweep = Sniper Entry

This is the most precise method: price first breaks recent support/resistance to hunt stops (liquidity sweep of retail stops), then immediately reverses into a bullish FVG.

This is the big fund’s routine—kill retail traders first, then push their own orders.

Best timeframes for combination

• 4-hour and 1-hour: used to identify major FVGs and market structure. These define the main direction.
• 15-minute and 5-minute: used to confirm entry signals. Prevents fake breakouts.
• 1-minute: only suitable for highly professional scalpers. Beginners should avoid.

Practical case: BTC FVG sniping

In a certain market scenario:

On the 1-hour chart, BTC surged from $61,800 to $62,600, forming a clear bullish FVG (between $62,000-$62,500).

Price paused at $62,600 and started to retrace.

When the price returned to $62,300, a bullish engulfing candle appeared on the 15-minute chart.

Confirmation of entry signal.

Trade details:

• Entry price: $62,350
• Stop-loss: $62,100 (below the FVG)
• First target: $62,800
• Second target: $63,200

Result: With a relatively small risk ($250), gained $850 profit. Risk-reward ratio 3:1.

Risk management—this is key to survival

Even the best strategy can fail. Do these well:

Risk per trade: no more than 1-2% of your account. For a $10,000 account, loss per trade should not exceed $100-$200.

Stop-loss placement: always logical. Don’t place it randomly. The best spots are below the FVG or order block.

Profit targets: don’t be greedy. Use multiple targets—20% of position at the first, 50% at the second, and trail the rest with the trend.

Keep a journal: record every FVG trade. Analyze why you won or lost. After three months, you’ll identify your fixed weaknesses.

Beware of invalidation: FVGs in choppy ranges are prone to failure. Use only in clear trending conditions. Avoid during sideways markets.

Core of FVG—must be used in combination

Using FVG alone is like seeing with one eye—prone to errors.

The power of FVG is maximized when combined with:

• Market structure confirmation of trend
• Order blocks for added certainty
• Liquidity sweeps to catch the best entries
• Multi-timeframe validation

All four elements are indispensable. When aligned, you possess institutional-level trading logic.

Remember—every FVG left by big funds is an opportunity for retail traders and a test. Learning to read it correctly is stepping into the threshold of professional trading.