No one knows when or how, but observation and experience help us to identify possible inefficiencies in the market.
This is the case of the use of FAIR VALUE GAPS or FVG.
FVG are most commonly used amongst price action traders and are defined as instances in which there are inefficiencies, or imbalances, in the market. These ‘imbalances’ simply suggest that buying and selling pressures are not equal and thus price revisits them sooner or later.
Fair Value Gaps are created within a three-candle sequence and are commonly visualized on the chart as a large candle whose neighboring candles' upper and lower wicks do not fully overlap the large candle.
I understand its operation as places where many institutional orders have not been fully covered and remain stagnant as "liquidity". Many of those orders will be covered over time by the price that always tends to seek the liquidity of the market.
The use of these GAPS is widely used in scalping, basically to identify entry or exit points, but we could also apply them to longer-term trading techniques.
On the BITCOIN chart we can see multiple FVG and how the price ends up filling them sooner or later, normally causing reversal movements, below is an example:
How do we have the weekly chart today?
There are a couple of FVGs with enough "entity" to be taken into account, the first around $14,800 and the second, more importantly, around $12,000... both can be hot spots as the FVGs above They have already been covered previously, although we are left with one of medium importance towards $36,000.
To cover the $36,000 price would have to increase by 86%... to cover the $12,000 price would only have to go down 34%.
Buuffff...At the level of "power of attraction", it seems to me that we are closer to $12,000 but I hope I am wrong...
*Disclaimer: This is just my personal point of view, please, do your own assessment and act consequently. Neither this post nor myself is responsible for any of your profit/losses obtained as a result of this information.