What the zones are
An order block is the last candle before a strong move, usually opposite to it in direction. The logic: to push price, somebody had to build a position first, and this is where they did it.
A Fair Value Gap is a stretch inside the impulse that price crossed so quickly there were almost no opposing trades. Formally it is the gap between the wicks of the first and third candles.
Why price returns
The reason is the same for both zones but shows up differently. An order block retains the unfilled interest of the participant who started the move. An imbalance retains levels where almost no exchange took place.
Hence the difference in reading: an imbalance stops working the moment price passes through it, while an order block can work repeatedly for as long as the structure holds.
When they overlap
Most often they sit close together: the order block is the start of the impulse, the imbalance its middle. Where those two zones overlap is a stronger reference than either alone.
The practical rule is simple: find the impulse, then both zones inside it. If they overlap, work from the edge of the overlap; if they are apart, priority usually goes to whichever is nearer current price.
Filtering out the noise
There are many order blocks and imbalances on a chart, and most mean nothing. Selection is by context rather than shape: a zone at a level price has already visited is worth incomparably more than the same zone in the middle of a move.
The second filter is timeframe. A zone on the four-hour chart survives several days; one on a minute chart fills within half an hour. Working the lower ones is possible, but it is scalping with a high share of noise.
The third is higher-timeframe direction. Both zones perform noticeably worse against a strong trend: the return happens, but the continuation does not.
Frequently asked questions
- How does an FVG differ from an order block?
- An order block is the specific candle an impulse started from. An FVG is the gap inside the impulse, an area of skipped trading. Different objects, often located near each other.
- Which is more reliable?
- The overlap of both. On their own, an order block usually lasts longer, while an imbalance stops working as soon as price passes through it.
- How do I find both on a chart?
- Start by finding a pronounced impulse. The last opposite candle before it is the order block; the gap between the wicks of the first and third candles of the impulse is the FVG.
Other lessons in this track
This material is educational and is not individual investment advice.