Fair Value Gaps & Orderblocks Explained | Stop Confusing Them

Added: 2026-05-05

[00:00:00]Yo, yo, yo, what's the dilio, man?

[00:00:02]Listen, you already know I got a straight banger for you today, all right?

[00:00:08]So, in this video we're going to talk about is fair value gaps versus order blocks.

[00:00:14]All right?

[00:00:16]What is the difference between fair value gaps and order blocks and we're going to go into it.

[00:00:21]All right? So, you already know, man, I'm always here to help you all level up your game.

[00:00:27]Point-blank period, okay? So, nothing that I say in this video is financial advice. If you guys want financial advice, be sure to talk to a licensed financial advisor, okay?

[00:00:39]Now, we're going to go into order blocks and fair value gaps or fair value gaps and order blocks, but what I want to do first is I want you guys to understand where they come from, okay?

[00:00:51]And all they are is they're a part of smart money concepts.

[00:00:59]Right? What are smart money concepts?

[00:01:02]What is smart money? Smart money is the biggest banks, the biggest institutional banks, right? The biggest investors in the game in the world.

[00:01:15]Right? So, smart money concepts is a concept where you follow smart money.

[00:01:22]Okay?

[00:01:24]Now, with that being said, now you got to understand that order blocks and fair value gaps are under smart money concepts.

[00:01:35]So, they're a tool that you can use to help you with your trading so that you can trade in alignment with how smart money is entering in their positions or taking profit. If they take profit, you can enter in the puts. If they're buying in, you can enter in the calls.

[00:01:56]All right?

[00:01:58]So, that is the foundation of what we're about to talk about.

[00:02:04]Now, you may hear me talk about an order block and you may hear me talk about a fair value gap. What is the real difference? Cuz I don't want you not fully understanding what the difference is. Okay?

[00:02:18]So, and I'm going to show you guys on the on the charts some examples, but a order block it is suggests a trend or a structure reversal.

[00:02:36]That is, in layman's terms, a order block. So, when you see a stock coming down, once that last big red candle is done and it prints and then no other stock goes below it, and then you got like a green candle after that, it's going to create a order block. And that's basically saying that this is the area where institutional buyers have bought into this position.

[00:03:08]And if it goes below here, they're selling out and it's going to go to the next order block.

[00:03:15]Okay?

[00:03:17]Same thing to the upside. This is where they are selling out of their position after a green a big green candle or uptrend.

[00:03:27]So, this is why they're so powerful because I use order blocks over support and resistance all day, every day.

[00:03:36]All day, every day. Way more powerful, way more accurate.

[00:03:41]When I was beginning and when I was trading in the beginning, I used to be like, oh, I'm in uh this is support and resistance. We break above resistance.

[00:03:53]I get into a call. We reverse. I don't [snorts] know why.

[00:03:58]Why is it? It's because it was probably an order block up there and sellers were sitting right there and I didn't see.

[00:04:06]Right?

[00:04:09]So, that is what an order block is.

[00:04:13]Now, what is a fair value gap?

[00:04:16]A fair value gap shows you the momentum of a trend and it helps you with your entries.

[00:04:25]That's why I love taking entries at fair value gaps.

[00:04:30]Depending on what the time frame is. The reason why is because if we have a ton of buyers and we're in a uptrend, then I know that we still have upside momentum as long as we stay above these fair value gaps.

[00:04:47]Right? And what is a fair value gap?

[00:04:50]It is a inefficiency a inefficiency on the charts that has a area on the charts that has not been tested yet.

[00:05:01]And because we understand that stocks are always in price discovery mode, when there is a inefficiency, i.e. a gap, it has to get filled and get liquidity and then it can continue to go into its direction of the trend that it's already in.

[00:05:24]And that's where we get a pullback from.

[00:05:28]A pullback is there may be a fair value gap in this area. We come down and then we go right back up. Why?

[00:05:38]Because there was a gap there, aka a fair value gap, and in that gap there were buyers.

[00:05:45]Right? There were buyers in that gap.

[00:05:47]That's how we play the game.

[00:05:50]Okay? So, that's what a fair value gap is.

[00:05:53]It is a three candle sequence that creates a gap. If we're in a uptrend, you have the top of the first wick of the three candle sequence and the bottom of the third wick in the in the middle creates a gap.

[00:06:08]That is a bullish fair value gap.

[00:06:12]And to the downside, if we're in a downtrend, and then you have a uh the the bottom candle of the first red candle, the bottom wick of the first red candle, and the top wick of the third red candle creates a gap.

[00:06:33]That is a fair value gap. It is a imbalance. It is a inefficiency.

[00:06:38]This is a great place for entries to ride it to the upside or to the downside, just depends on that market structure.

[00:06:46]Right? This has made trading very clear to me.

[00:06:50]Right? So, let's now go to the charts and let me show you guys the order blocks versus the fair value gaps.

[00:07:02]Now, perfect example.

[00:07:07]Right here we have IWM.

[00:07:09]As you guys can see, right here, we came down, a downtrend.

[00:07:19]And then boom, we started to come up.

[00:07:22]Institutions institutions said, "Hey, we're going to take uh take position right here."

[00:07:34]Right? Institutional money entered in right here, came up.

[00:07:40]Right?

[00:07:43]Boom.

[00:07:46]Right here, this area, came down twice.

[00:07:56]Institutional money said, "Hey, we're going to enter in right here."

[00:08:00]What did it do? It created this order block right here.

[00:08:03]Right? Order block, order block. Boom.

[00:08:07]Order block and order block.

[00:08:11]Now, we're in a uptrend.

[00:08:14]Oh, perfect. Now, we're in a uptrend.

[00:08:18]Okay?

[00:08:20]The top the top of the first candle, the top wick of the first candle, and then this created a fair value gap because it gapped up. Right? So, now we got a gap up. Anytime you have a gap up, it's going to create them on the on the daily time frame.

[00:08:37]Right? So, gap up there, a gap up here, and then it created another fair value gap, right? Top of this wick and then the bottom of this wick, I created another fair value gap, right? On the daily. So, we have all these fair value gaps saying that we're in a uptrend.

[00:08:54]We're in a uptrend and buyers are holding the momentum of this uptrend up and this is where they're willing to enter in to continue and go to the next leg.

[00:09:08]Now, if we break through this area and we take out these buyers, then the momentum is starting to fade and we could start coming down to this area.

[00:09:18]And then if we break through here, then we're going to come down to this area and so on and so forth.

[00:09:23]All right?

[00:09:25]Now, let's go to a smaller time frame or a different stock. Let's go to Intel.

[00:09:31]Look at Intel, y'all.

[00:09:33]Right?

[00:09:34]Boom.

[00:09:36]Very similar.

[00:09:38]Order block here, a reversal. Came down, reversal, blast off.

[00:09:45]All right, perfect.

[00:09:47]Anytime we had a fair value gap, that was a great place for entry and then you ride it up.

[00:09:55]Okay? Created a bet bull flag here.

[00:09:58]Had earnings, gapped up, went crazy.

[00:10:01]Now we're going to come and test into this fair value gap and see how low we can go.

[00:10:08]We could bounce or we could break through and come and fill this gap right here.

[00:10:12]Now let's go to a smaller time frame.

[00:10:18]Um let's say let's do this.

[00:10:28]Okay.

[00:10:31]Now we're in a downtrend, right? Okay, we got a downtrend on the 15-minute.

[00:10:36]We created a fair value gap here.

[00:10:39]Until we get above here, we're still in a downtrend.

[00:10:43]That's how the game goes.

[00:10:45]This lets you know that the seller's momentum is here.

[00:10:50]And as long as we stay below here, we're in that downtrend. And as you can see, we came down, we created it, seller said, "This is where we at."

[00:10:57]We tried to come up, we rejected, tried to come up, we rejected, and then boom, we came down.

[00:11:02]Tried to come back up, created a lower high, and then what? We came right back down. To where? This order block right here. So, if we break below this order block, then institutions are saying it's getting a little bit weaker, and then we come to the daily time frame and we see where this is going to be at.

[00:11:18]Okay?

[00:11:20]That is how the game goes, y'all.

[00:11:23]Right? Does not matter the stock.

[00:11:28]It doesn't matter the stock.

[00:11:30]Order block, trend reversal, fair value gaps, riding the momentum to the upside.

[00:11:37]When we come back down here in the uptrend, you enter in calls, and then you ride it back to the upside. If we break through it, that's when you know that the trend is losing steam, losing momentum, and then we could come back lower.

[00:11:54]Okay?

[00:11:56]So, that is the difference between fair value gaps and order blocks.

[00:12:04]All right? I hope that this video clarified it. I hope that this video helped you out, and if it did, let me know in the comments. All right, y'all?

[00:12:12]Like I always say, make sure you get about your head, go get into this world because your head is a dangerous place to live. All right? Also remember, y'all, the more you study, the less you worry. All right? Y'all have a great day. I'mma holler at you guys on the next video. Y'all stay smooth, man.

[00:12:35]Peace.