Hello friends, these days my posts will be more informative. The subject of today's article is FVG, which everyone knows, has heard of, has seen, and knows about.
Fair Value Gap: Comparing Market Prices to Fair Value in Technical Analysis
When investing in financial markets, understanding and analyzing price movements is critical. In this context, Fair Value Gap (FVG) is an important concept that helps investors determine how consistent market prices are with fair value. In this article, we will take an in-depth look at what FVG is, how it is formed, and how it is used in technical analysis.
What is the Fair Value Gap?
Fair Value Gap refers to the difference made by the market price relative to the fair value of a particular asset. Fair value is a value usually calculated through financial modeling, company analysis or economic indicators. The market price represents the instant price that investors give to that asset. The difference is called the Fair Value Gap.
Formation of the Fair Value Gap
The Fair Value Gap typically occurs between two key components:
Market Price etc. Fair Value: Fair value is a theoretical value that reflects the asset's financial performance or economic conditions. Market price is the price level determined by investors' current shopping decisions. The difference between these two prices creates the Fair Value Gap.
Price Gaps and Gaps: In technical analysis, price gaps are situations where significant gaps occur in price movements. These gaps are taken into account by the market and it is generally assumed that prices tend to find fair value. For example, if the opening price of a stock is significantly away from the previous closing price, this creates a gap and this gap is considered FVG.
