What Is a Fair Value Gap (FVG)?
A fair value gap (FVG) is a three-candle price imbalance — the gap left between the wick of the first candle and the wick of the third candle when a large middle candle moves price so fast it creates an inefficiency. Because the market tends to "rebalance" these inefficiencies, traders watch for price to return to the FVG and react from it.
How a fair value gap forms
FVGs appear during fast, one-sided moves. When a big candle rips through a level, buyers and sellers didn't get to transact at every price along the way — that skipped-over zone is the "gap" in fair value. On the chart it's the empty space between candle 1's wick and candle 3's wick, straddling the big candle 2.
How to spot an FVG
- Find a large-bodied candle (the "displacement" candle).
- Look at the candle before it and the candle after it.
- If there's a gap between the high of the earlier candle and the low of the later candle (bullish), or the low of the earlier and high of the later (bearish), that untouched space is your FVG.
How to trade a fair value gap
The common approach: after price makes the displacement move, wait for it to pull back into the FVG, then look for a reaction in the direction of the original move. Traders enter on that reaction, place a stop just beyond the gap, and target the next liquidity level or order block. An FVG is a probability zone — not every gap fills, and not every fill reacts. Combine it with market structure and risk management.
An FVG tells you where price may react. Your risk management decides whether you survive when it doesn't.
Bullish vs. bearish FVG
A bullish FVG forms on a strong up-move and acts as potential support on a pullback. A bearish FVG forms on a strong down-move and acts as potential resistance on a bounce. Higher-timeframe FVGs tend to be more significant than tiny lower-timeframe ones.
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What does FVG mean?
FVG stands for "fair value gap" — a three-candle imbalance where price moved so fast it left an inefficiency traders expect to be revisited.
Do all fair value gaps get filled?
No. Many do, but not all — and a fill doesn't guarantee a reaction. It's a probability tool used with structure and risk management.
What timeframe is best for FVGs?
Higher-timeframe FVGs (e.g., 15m, 1h) are generally more reliable than 1-minute ones, but day traders use all of them in context.
Educational content only, not financial advice. Trading futures carries substantial risk of loss.