Glossary
Fair Value Gap (FVG)
A price imbalance left by a fast three-candle move that price often returns to fill.
Fair Value Gap (FVG), explained
A fair value gap (FVG), also called an imbalance, is a gap in delivered price created by a strong three-candle sequence: the gap is the space between the first candle's wick and the third candle's wick, left unfilled by the explosive middle candle.
An FVG represents inefficient, one-sided trading — price moved so fast that not every order got filled. Markets tend to revisit these gaps to rebalance, which is why an FVG often acts as a magnet and then a reaction zone. The gap is a footprint of momentum that price frequently returns to address.
To spot one mechanically, look at any three consecutive candles around a sharp move: if the first candle's high and the third candle's low do not overlap (in a bullish move), the empty band between them is the FVG. The same logic, mirrored, marks a bearish gap on a sharp drop.
Traders use FVGs both as targets (price drawn to fill the gap) and as entries (price returning to the gap and continuing in the original direction), frequently in combination with an order block at the same level. A partly filled gap is common — many traders watch for a reaction once price reaches the gap's midpoint rather than requiring a full fill.
On the desk an FVG that lines up with an order block is a high-confluence zone: the gap explains why price is being pulled back, and the block explains why it should react there. When the two coincide, the entry is cleaner and the stop can sit just beyond both.
Frequently asked questions
- How do I identify a fair value gap?
- Look at three candles around a sharp move. If the first candle's wick and the third candle's wick do not overlap, the empty space between them — skipped by the strong middle candle — is the fair value gap.
- Does price always fill a fair value gap?
- Not always, and not always fully. Gaps act as magnets and many get filled, but some are only partially filled or left open for a long time. Traders often watch for a reaction at the gap's midpoint rather than demanding a complete fill.
Related terms
Imbalance
An area where price moved so fast that buying and selling were lopsided — often the same thing as a fair value gap.
ReadOrder Block
The last opposing candle before a strong, displaced move — a zone where institutions absorbed flow.
ReadDisplacement
A strong, decisive move that signals real intent — the engine behind order blocks and fair value gaps.
ReadMitigation
When price returns to an order block or imbalance so earlier positions can be managed before continuation.
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