So, to draw an FVG zone on the candlestick chart so you can use it for trade analysis, you will have to follow a few steps:
- Identify the large candlestick that created a fair value gap or imbalance on the chart. This will also act as a reference candlestick for drawing the FVG zone.
- Now draw a horizontal line on highs/lows of previous/prior candlesticks. In case of an undervalued fair value gap, draw a horizontal line on the low of the previous candlestick and the high of the next candlestick. In case of an overrated FVG, draw a z horizontal line on the high of the previous candlestick and the low of the next candlestick.
- Fill the difference between both lines with colour and extend this zone to the right until the price touches this zone; it will remain valid.
Keep in mind that this FVG zone will act as a 'magnet for price ', attracting it. Once the price touches the zone or breaks the zone, it will become invalid.