Lesson 59 of 69
Fair value gap (FVG)
8 min read
Chapter checkpoints
0/4- The three candles that make a gap
- How and why gaps get filled
- How traders use an FVG
- Bullish vs bearish FVG
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A fair value is a three- pattern that marks a moment of imbalance — a stretch where price moved so decisively in one direction that the other side barely had time to transact. The gap is the price area the move skipped over, and traders watch it because markets have a strong tendency to come back and revisit those areas before continuing.
Read it as imbalance, not as magic
An is a visible footprint of aggressive demand or supply. It is a useful that a move was genuine, but it does not guarantee price returns, and it does not guarantee . Plenty of are never filled and some are cut straight through. Treat it as one input, tested on your own charts.
The three that make a gap
An FVG is always read across three consecutive candles. The first and third candles are the anchors; the gap lives in the price space between them that the second candle's body or never reached.
- FVG: candle one's high is below candle three's low. The space between candle one's high and candle three's low is the gap, left by a sharp move up in candle two.
- FVG: candle one's low is above candle three's high. The space between candle three's high and candle one's low is the gap, left by a sharp move down in candle two.
- The bigger candle two is relative to the surrounding candles, the more visible and meaningful the imbalance.
What it looks like on a chart
Picture three daily candles. The first is a normal down day closing at 1.0800. The second gaps up at the , rallies hard, and closes at 1.0920 with barely a . The third drifts between 1.0880 and 1.0900 and never trades back below 1.0920. The band from 1.0800 up to 1.0880 was left untouched by candles two and three — that empty zone is the bullish fair value gap.
How and why gaps get filled
A fill happens when price returns and trades back through the gap, restoring the two-sided trading the original move skipped. The reasoning traders give is that resting orders — partial profit-taking, unfilled entries, and the orders that created the move — sit in that zone, so price is drawn back to balance them before it can continue.
| Partial fill | Full fill | No fill (continuation) | |
|---|---|---|---|
| What happens | Price returns into the gap but reverses before crossing it | Price trades back across the entire gap | Price never returns — it keeps extending in the move's direction |
| Read as | A reaction zone, often a tradeable entry | The imbalance is balanced; trend may resume fresh | Demand or supply was strong enough to ignore the gap |
| Frequency | Common | Common | Also common — never assume a fill is guaranteed |
How traders use an FVG
- 1Confirm the move that created the gap was genuine — ideally it also broke structure (a BOS) rather than being a one-candle spike.
- 2Mark the gap as a band, not a single line, on the it formed on.
- 3Wait for price to return into the gap — do not chase the original move.
- 4Look for confirmation inside the gap: a wick, an candle, or a smaller-timeframe structure shift before entering.
- 5Place the beyond the gap and the swing that created it, then size the position from that distance to keep risk fixed at 1%.
FVGs nest inside order blocks
An order block is the candle that started the move; an FVG is the imbalance the move left behind. The strongest zones combine both — the order block at the origin and a fair value gap just behind it — because they describe the same aggressive interest from two angles.
Bullish vs bearish FVG
| Bullish FVG | Bearish FVG | |
|---|---|---|
| Formed by | A sharp move up in candle two | A sharp move down in candle two |
| Gap sits | Between candle one's high and candle three's low | Between candle three's high and candle one's low |
| Traded as | A potential buy zone on a return | A potential sell zone on a return |
| Invalidated when | Price closes decisively below the gap | Price closes decisively above the gap |
Mind the timeframe
An FVG on a 5-minute chart is noise for most retail traders; an FVG on a 4-hour or daily chart carries far more weight. Higher-timeframe gaps are watched by more participants and tend to be more reliable as reaction zones.
Practise this on a chart
0/3Related lessons & next steps
Key takeaways
- A fair value gap is the space left between candle 1's wick and candle 3's wick in a three-candle impulse.
- It shows price moved so fast that one side had no chance to trade — an imbalance in delivery.
- Price often returns to fill part or all of the gap before continuing.
- Gaps aligned with the higher-timeframe direction are far more reliable than gaps against it.
Knowledge check
3 quick questions — your best score is saved to your progress.
1. A fair value gap is measured between…
2. Why does price often return to a fair value gap?
3. Which gap is generally the more reliable one to trade?
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