Traders Unlock Hidden Edge by Combining Initial balance and Fair Value Gaps
A confluence of two key technical analysis tools - teh Initial Balance (IB) and fair Value Gaps (FVG) – is giving complex traders a powerful advantage in navigating market volatility, according too recent insights from trader Dale. While both concepts are individually utilized within the trading community, their combined submission offers a nuanced perspective often missed by those relying on single indicators.
The core principle lies in how the IB,representing price action during the first hour of trading,provides crucial context to FVG formations. Typically, a bearish FVG would signal a shorting chance. However, when occurring within the IB, the dynamic shifts, potentially presenting a bullish counter-trend setup. This is as the IB establishes a zone of expected consolidation, suggesting a move back to the mean, even amidst seemingly bearish signals. “Because if we didn’t have the initial balance here, what I’d see is bearish price action - a bearish fair value gap right here,” explained Dale. “But when you add the initial balance, price is now consolidating inside that bearish fair value gap while also back inside the IB. The IB gives you a bullish perspective even though we’re inside a bearish FVG.”
This “secret combo” allows traders to refine entry and exit points, manage risk more effectively, and capitalize on opportunities others overlook. Dale highlighted a recent Friday setup where a bearish FVG displacement coincided with the IB low, creating a “perfect” scenario. Rather of immediately shorting the FVG, the IB context suggested a bullish bias, awaiting a break of the 15-minute FVG to the downside before considering a bearish position. The IB, he emphasized, provides “additional structure that many traders don’t see or understand,” and is frequently enough “much more critically important than the fair value gap.”
The strategy isn’t limited to specific timeframes, but the 15-minute chart was used as an example. Traders are encouraged to identify the IB and then analyze subsequent FVG formations within that range,adjusting their outlook based on the interplay between the two. Dale currently offers training and mentorship through his Funded Trader academy for those seeking to implement this approach.
