Fair value gap (FVG)

In practice

In a rally, candle one closes at 1.1050, a huge green candle two pushes to 1.1090, and candle three's low is 1.1060 — leaving an unfilled gap between 1.1050 and 1.1060. Price later retraces down to 1.1055, 'filling' the FVG, then resumes higher.

Why it matters for traders

Fair value gaps give traders precise, objective zones to expect a retrace, which turns chasing a move into waiting for a planned re-entry. Because they are well-defined and widely watched, they also act as magnets for price, making them one of the most actionable concepts in modern price-action trading.

Common pitfall

Traders treat every FVG as a guaranteed fill and hold through large adverse moves waiting for it, but some gaps never fill before the trend extends far. The pitfall is risk-free thinking. Trade the FVG as a high-probability retrace zone with a defined stop, not as a certainty. Also avoid stacking many overlapping FVG ideas on one chart — pick the cleanest, freshest gaps near key structure rather than trading every minor inefficiency.

Putting it in context

Price action concepts like this one work because they describe what buyers and sellers actually did, rather than what an indicator derived from those prices suggests. Used well, they anchor decisions in structure: clear levels where other participants are likely to act again. The skill that takes time is judging which structures matter on the timeframe you trade — a level obvious on the daily chart is usually significant, while most five-minute structures are noise. Mark your levels before the session, wait for price to reach them, and only then look for a signal. Trading every minor formation without that location filter is the most common reason beginners conclude price action 'doesn't work.'

Lessons that use this term

• Fair value gaps (FVG)

  The three-candle imbalance price leaves behind when it moves too fast — and why it usually gets filled.

• Fair value gap (FVG)

  The three-candle imbalance pattern, how a bullish and bearish FVG form, why price often returns to fill the gap, and how traders use it as confirmation rather than a stand-alone signal.

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