Understanding Fair Value: The Market's True North
Most traders chase price without understanding what assets are actually worth. Fair value analysis helps you spot when something is genuinely cheap or expensive.
What Fair Value Means:
Market Consensus Price
Where buyers and sellers agree an asset should trade under normal conditions. When $BTC trades 20% below fair value, that's opportunity. When 30% above, exercise caution.
My Fair Value Tools:
VWAP: Volume-Weighted Reality
Shows true average price weighted by trading activity. I track weekly, monthly, and yearly timeframes.
When $ETH hit 2+ standard deviations above monthly VWAP, it was mathematically extended - perfect for profit-taking.
Volume Profile: Where Business Happens
Value Area shows where 70% of trading occurred. Point of Control (POC) marks highest activity zone.
Key insight: Previous untested POCs act like magnets - price often returns to these levels.
Real-Time Signals
Order book heatmaps show institutional positioning. CVD tracks buying vs selling pressure - when it diverges from price, watch for reversion.
Practical Use:
Fair value isn't about predicting exact prices - it's about understanding when risk/reward favors you. When multiple indicators align, that's when I size up.
Example: $SOL below weekly VWAP + on Volume Profile support + positive CVD divergence = high-probability bounce.
Which tool would improve your entries most?