Order Block (OB):
> Imagine a specific price level on a chart where a significant number of buy or sell orders have gathered.
>When these chunks of orders are triggered, it leads to a significant price move on the chart.
> Essentially, an order block represents a zone of imbalance where supply and demand are not in equilibrium.
>Traders pay attention to order blocks because prices often react when they revisit these zones.
Fair Value Gap (FVG):
>The FVG refers to the difference between the current value of an asset or currency and its fair value due to inefficiency or imbalance in the market.
> How to identify FVG: Technical Analysis: Analyze candlestick patterns to find the imbalance. Look for a huge-size candlestick with a 70% body-to-wick ratio. Compare its size with the last 20 to 40 candlesticks. Neighboring candlesticks should not overlap significantly with the big one. The price area between the previous candlestick’s low and the next candlestick’s high acts as the FVG.
>Types of FVG:
>Undervalued FVG: Price is lower than its fair value. A big bearish candlestick indicates this.
>Overrated FVG: Price is higher than its fair value. A big bullish candlestick shows this.
>Drawing the FVG zone on a chart: For undervalued FVG, draw a rectangle using the previous candlestick’s low and the next candlestick’s high. For overrated FVG, draw a rectangle using the previous candlestick’s high and the next candlestick’s low. Extend the rectangles to the right until the price fills those zones. The FVG acts as a magnet for price, as everything tends to come to rest or balance itself.
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