If you’ve been learning about smart money concepts (SMC) in forex trading, you’ve probably come across the terms FVG (Fair Value Gap) and OB (Order Block). These are two of the most powerful tools used by institutional traders to spot high-probability setups.
In this article, we’ll explain what FVG and OB are, why they matter, and how to trade them step by step.
1. What Is an FVG (Fair Value Gap)?
A Fair Value Gap is an imbalance in the market where price moves too quickly in one direction, leaving behind a “gap” between candles.
•Example: A strong bullish candle forms, and its low does not overlap with the high of the previous candle → this creates an imbalance zone.
•Purpose: The market often returns later to “fill” this gap, balancing price before continuing in the original direction.
Traders use FVGs as entry zones because they expect price to revisit the gap before moving further.
2. What Is an OB (Order Block)?
An Order Block is the last bullish or bearish candle before a big market move. It represents areas where banks and institutions placed large orders.
•Bullish Order Block: The last down candle before a strong upward move.
•Bearish Order Block: The last up candle before a strong downward move.
Order blocks act like support and resistance zones, where price often reacts again in the future.
3. How to Identify FVG and OB on Charts
For FVG:
1.Look for three consecutive candles.
2.If the wick of the first and third candle don’t overlap with the body of the middle candle → that’s your FVG.
3.Mark the zone.
For OB:
1.Identify a strong impulsive move (big breakout candle).
2.Mark the last opposite candle before that move.
3.That zone becomes your order block.
4. How to Trade FVGs
Step 1: Identify imbalance
Mark the gap between candles on your chart.
Step 2: Wait for price to return
Price usually retraces to fill part of the gap.
Step 3: Enter trade
Enter in the direction of the original move once price taps the FVG.
Step 4: Risk management
Stop-loss goes below/above the FVG zone, and targets can be recent swing highs/lows.
5. How to Trade Order Blocks
Step 1: Mark OB zones
Find the last opposite candle before a strong move.
Step 2: Wait for retest
Price often comes back to test this OB.
Step 3: Enter trade
Trade in the same direction of the breakout after confirmation.
Step 4: Risk management
Stop-loss goes beyond the OB zone. Take profit at major liquidity levels.
6. Combining FVG and OB
The most effective way is to combine both concepts:
•Wait for price to return to a Fair Value Gap inside an Order Block.
•This gives stronger confluence and higher probability of success.
Final Thoughts
Both Fair Value Gaps (FVGs) and Order Blocks (OBs) are smart money concepts that reveal how big players move the market. By understanding them, you can stop trading against institutions and instead align with their strategies.
The secret is patience: wait for price to return to your marked zones, confirm reversal, and then trade with proper risk management.
Disclaimer
This article is for educational purposes only and does not provide financial or investment advice. Forex trading involves significant risk and may not be suitable for all investors. Always do your own research and consult with a licensed financial advisor before trading.
