Glossary
What Is a Fair Value Gap (FVG) in Trading
The gap between the wick of the first and the wick of the third candle, left by an impulse: almost no two-way trading happened there. Price sometimes returns to that zone — but it does not have to.
How it works
A Fair Value Gap (FVG), or imbalance, is a price gap formed across three consecutive candles: the wick of the first candle and the wick of the third candle don't overlap, while the middle candle covers that distance in one strong move. Such a gap means almost no two-sided trading happened in that zone — price moved through it too fast for orders to be matched both ways.
On a chart, you find an FVG using that exact geometry: compare the upper wick of the first candle to the lower wick of the third candle (for an up move), or the reverse for a down move, and mark the zone between them. The stronger the middle candle's move, the more visible the gap.
The idea behind trading FVGs is that price statistically tends to return and "fill" these zones before continuing — traders treat them as potential entry zones in the direction of the larger trend, not as a standalone reversal signal.
Example
Candle 1 closes with an upper wick at 100. Candle 2 rallies hard from 101 to 108. Candle 3 opens above 100 and never drops below 104. The zone between 100 and 104 wasn't traded by any of the three candles — that's the FVG.
Common mistake
A common mistake is trading every FVG as a standalone entry signal without checking the broader market direction. An FVG against a strong trend often just gets run straight through without ever being filled.
Read next
Related terms
Frequently asked questions
- Does price always come back to fill an FVG?
- No, it's a tendency, not a guarantee — during a strong impulsive move, price can keep going without ever filling the gap.
- How is an FVG different from an order block?
- An FVG is a three-candle gap from a lack of two-sided trading, while an order block is a specific candle before an impulse move that's presumed to hold unfilled large orders.
Plan versus outcome — for every trade
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