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Validating Supply and Demand Zones with Secondary Evidence

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How to Identify Fair Value — and Why Avoiding It Can Improve Your Trading

 How to Identify Fair Value — and Why Avoiding It Can Improve Your Trading



Hook (Introduction)

Most traders get stuck in the same frustrating cycle: entering trades too late, exiting too early, or buying right at the price levels where the market stops moving. What if the solution isn’t chasing momentum or predicting news… but simply understanding fair value?
Learning how to identify — and in many cases avoid — fair value zones could be the key that transforms your strategy and protects your capital.


What Is Fair Value in Trading?

Fair value is a price zone where buyers and sellers agree on what an asset should be worth. At these levels:

  • Supply and demand are balanced
  • Price often moves sideways
  • Momentum slows
  • Risk of false breakouts increases

These are the zones where traders get chopped up — unless they know what to look for.


How to Identify Fair Value Zones

Understanding fair value starts with reading price behavior. Here are simple ways to spot it:

✅ 1. Extended Consolidation Areas

If price moves in a tight range for a long period, the market is establishing consensus.
This is fair value — and it’s often where the worst trades happen.

✅ 2. High-Volume Nodes

On a volume profile, tall spikes show where most transactions took place.
These are areas the market considers “comfortable,” which means fewer big moves.

✅ 3. Midpoints of Big Impulsive Moves

After a strong push, price often retraces to the midpoint before choosing its next direction.
This midpoint becomes temporary fair value.


Why Avoiding Fair Value Improves Your Trading

Successful traders don’t fight the market — they follow where imbalance exists.
Fair value is balance. You want imbalance.

✅ 1. Fair Value = Unfavorable Risk/Reward

When price is stuck in fair value, volatility shrinks.
Small potential reward + uncertain direction = bad setup.

✅ 2. Market Makers Accumulate and Distribute Here

Fair value zones are often institutional playgrounds.
Entering here means you’re trading while the big players are preparing — not moving.

✅ 3. Breakouts and Breakdowns Start at the Edges, Not the Middle

Money is made at extremes, not at equilibrium.
Avoid the middle, trade the edges.


Subheading: Where You Should Trade Instead

If you avoid fair value, you want to focus on premium and discount zones:

  • Premium Zones: Areas where price is too high → Look for sell setups
  • Discount Zones: Areas where price is too low → Look for buy setups

These zones are where true supply and demand imbalances create powerful moves.


Conclusion

Fair value is the silent trap many traders fall into without realizing it.
Once you learn to identify and avoid these zones, your entries improve, your confidence grows, and your trades finally begin to align with market structure — not against it.

Are you ready to stop trading in the middle and start trading with real market imbalance?


If you want to master supply & demand, premium vs. discount, and real imbalance in the market, grab a copy of my book:

📘 SUPPLY & DEMAND APPLICATION IN STOCKS – INVESTMENT GUIDE
Your next step toward becoming a more confident, disciplined, and consistently profitable trader starts here.


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