What is Fair value gap (FVG)?
In short
A gap in a three-candle pattern: the zone between candle 1's high and candle 3's low where little trading happened. Price often returns to fill it.
Also known as: fvg, imbalance
A fair value gap (FVG), or imbalance, is a zone in a three-candle pattern where price moved so fast that almost no trading happened. The middle candle is so large that the wicks of candle 1 and candle 3 don't overlap.
How to spot it
- Bullish FVG: candle 1's high is below candle 3's low. The zone lies between those two points.
- Bearish FVG: candle 1's low is above candle 3's high.
It differs from a regular gap: in a gap the open jumps away from the prior close, while an FVG forms within continuous trading.
Why price returns to it
In an FVG one side dominated — supply and demand were out of balance. Price often comes back later to partly or fully "fill" the zone. Traders use that return as an entry, especially when the FVG sits next to an order block. The midpoint of the zone — the consequent encroachment — is a widely watched level.
Limitations
Not every FVG gets filled: in a strong trend price can run without looking back. On low timeframes FVGs are everywhere, so zones on higher timeframes that come with a BOS are more meaningful.
A three-candle pattern: a gap was left between the high of candle 1 and the low of candle 3 — price moved too fast there. Price often comes back later to "fill" it.
Example
A fictional stock, 1-hour chart:
- Candle 1: high $80.00
- Candle 2: strong green, from $80.20 to $84.50
- Candle 3: low $82.40
Candle 1's high ($80.00) is below candle 3's low ($82.40) — so there is a bullish FVG at $80.00–$82.40, $2.40 wide. Its midpoint (CE): ($80.00 + $82.40) ÷ 2 = $81.20. If price later drops from $86 to $81.30 and turns back up, the FVG has been partly filled and the zone acted as support.
Mistakes and tips
Use an FVG together with structure and trend, not as a standalone signal.
If price closes fully through the FVG, the zone is invalid — remove it from the chart.
When entering, put the stop beyond the far edge of the zone and calculate the risk/reward.
Frequently asked questions
- Does an FVG always get filled?
- No. Many FVGs get filled eventually, but in a strong trend price may not return to them for a long time.
- Is an FVG the same as a gap?
- No. A gap is a price jump between trading sessions; an FVG is a void across three candles within continuous trading.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- Order blocks: footprints of big playersWhat an order block is, which conditions make it valid, how to define the zone, mitigation and breaker blocks, entries, stops and targets, failures, and combining OBs with Fibonacci and FVGs.Open lesson · 13 min
- FVG and liquidity: why price comes backFair value gaps, the CE (50%), liquidity pools, sweeps versus real breakdowns — and how to combine them with order blocks into a trade plan.Open lesson · 11 min
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