EagleTrader: How to apply fair value gap strategy in self-operated trading exams

In the market, price fluctuations occur all the time, and the fair value gap strategy (Fair Value Gap)
Strategy) As a rational and systematic trading method, it can help traders discover potential trading opportunities when prices deviate from their theoretical value.

For traders preparing to take the EagleTrader exam, understanding and applying fair value gap strategies can not only improve the accuracy of market analysis, but also help traders avoid emotional decision-making and achieve better results in the exam.

What is a fair value gap strategy?

The fair value gap strategy is based on a simple assumption: market prices tend to fluctuate around a certain “fair value” level. When the market price deviates from this fair value, there is usually a trend of correction and regression. This strategy provides traders with a strong trading signal by identifying the gap between price and fair value.

Fair value is the theoretical market price derived from fundamental analysis. It considers many factors such as economic data, market sentiment, interest rates, monetary policy, etc.

Gap formation: The gap between market prices and fair value may be caused by short-term factors such as excessive market reactions, breaking news or emotional fluctuations.

Core Principles of Fair Value Gap Strategy

Traders identify market correction opportunities by calculating the gap between market prices and fair value. The core principles of the fair value gap strategy can be summarized as follows:

Price will always return to fair value: Once the market price deviates from fair value, the pressure for correction will increase, resulting in a gradual return of the price.

The combination of trend and range: In an upward trend, fair value may move upward, while in a downward trend, fair value may move downward. Understanding this trend can help make more accurate trading decisions in exam simulations.

How to apply fair value gap strategy in proprietary trading exams

In the EagleTrader exam, mastering fair value gap strategy can help traders establish more systematic trading ideas, reduce subjective emotional interference, and ensure that each transaction is based on the real value judgment of the market. Here are a few practical steps:

Basic analysis: By analyzing macroeconomic factors that affect fair value (For example, GDP data, employment rate, interest rate changes, etc.), traders can judge the fair value level of currency pairs.

Technical tool assistance: Use technical analysis tools (such as Bollinger bands, RSI, etc.) to assist in determining whether the price is in the overbought or oversold range, thereby confirming whether there is a possibility of correction in the market.

Exercises in mock exams: At EagleTrader, traders can use mock exam exercises to improve response speed and accuracy in formal exams.

Analysis of the advantages and disadvantages of fair value gap strategy

Advantages:

Systemization: This strategy provides traders with a rational analysis framework based on market fundamentals and price behavior, which helps make more objective trading decisions.

Reduce emotional interference: By focusing on fair value and price gaps, traders can avoid emotional decision-making and increase transaction consistency and stability.

Disadvantages:

Computation difficulty: The calculation of fair value depends on more complex fundamental analysis, which may pose certain challenges for beginners.

Revised time uncertain: The market may deviate from fair value for a long time, resulting in the effectiveness of the strategy being affected by time factors.

The fair value gap strategy is not only a theoretical tool, but also a practical strategy that can help traders make rational decisions in a complex market environment. In the EagleTrader exam, mastering this strategy can effectively improve traders’ market judgment and adaptability, and help traders better respond to market volatility and assessment challenges.

If you are preparing for Eagle
Trader self-operated trading exams, you might as well try to use fair value gap strategies in trading to gradually improve your trading skills. Remember, successful transactions are not just a competition of technology, but also a competition between rationality and emotional management.