How do you identify a Fair Value Gap?

Look at three consecutive candles. For a bullish FVG the gap is the space between the HIGH of candle 1 and the LOW of candle 3 - if candle 1's high sits below candle 3's low, that unfilled space is the FVG. For a bearish FVG it is the space between the LOW of candle 1 and the HIGH of candle 3, where candle 1's low sits above candle 3's high. The middle candle is usually a large momentum or expansion candle, and the gap exists because price moved so fast it never traded at those levels. On a chart it shows up as a clean, wick-free zone that the surrounding candles do not cover. Mark the top and bottom of that zone as a rectangle. The wider the gap and the higher the timeframe it forms on, the more meaningful it tends to be as a reference point for a later retracement.

How do you trade a Fair Value Gap?

The common approach is to wait for price to retrace back into the FVG zone, then enter in the direction of the original move - long for a bullish FVG, short for a bearish FVG. Many traders use the 50 percent midpoint of the gap as the trigger rather than requiring a full fill. Place the stop just beyond the far edge of the gap so a clean invalidation takes you out, and target the next liquidity level, swing point, or opposing FVG. The setup works best with confluence: higher-timeframe trend agreement, an order block at the same level, or a liquidity sweep just before the entry. Avoid trading gaps that form against the dominant trend or in the middle of a choppy range. Above all, tag and journal every FVG trade so you can measure the real win-rate and expectancy instead of trusting a pattern on faith.

Do all Fair Value Gaps get filled?

No. Many FVGs do get filled as price returns through them, but plenty never do - especially in strong trending moves where price keeps expanding and leaves the gap behind. Treating 'all gaps must fill' as a hard rule is a common beginner mistake that leads to catching falling knives or fading strong trends. FVGs are probability zones, not guarantees, and the fill can happen minutes, days, or never after the gap forms. A gap can also be only partially filled, with price tagging the midpoint and reversing before closing it completely. Context matters: gaps aligned with the higher-timeframe trend tend to get respected as support or resistance, while counter-trend gaps get overrun. Use them as one input among several - structure, trend, liquidity, and session timing - rather than a standalone strategy, and let your own journaled results tell you how often your gaps actually fill.

ICT Concept · 7 min read · 2026

What is a Fair Value Gap (FVG)?

Q: What is a Fair Value Gap (FVG)?

A Fair Value Gap (FVG) is a 3-candle pattern where the wicks of the first and third candle do not overlap, leaving an unfilled price gap on the middle candle. It marks an area of price imbalance created by an aggressive, one-sided directional move that ran through the range faster than orders could fill evenly. That untraded space represents inefficiency the market tends to revisit later, which is why traders treat FVGs as potential entry zones rather than random noise. A bullish FVG forms during an up-move and the gap acts as support on a pullback; a bearish FVG forms during a down-move and the gap acts as resistance on a bounce. The concept comes from ICT and Smart Money Concepts, but it describes something visible on any chart. Importantly, an FVG is a probability zone, not a signal to trade blindly - it works best confirmed by trend, structure, and your own tested data.

Q: Is a Fair Value Gap the same as an imbalance?

Yes - in ICT and Smart Money Concepts terminology, 'Fair Value Gap' and 'imbalance' refer to the same thing: a price area where the market moved aggressively in one direction without trading evenly through the range, leaving inefficiency behind. Some traders use 'imbalance' as the broader umbrella term for any one-sided delivery of price, and 'FVG' for the specific 3-candle formation you can measure between candle 1 and candle 3, but in practice they are functionally interchangeable. You will also hear related labels like 'inefficiency', 'liquidity void', or 'BISI/SIBI' (buyside and sellside imbalance) describing the same footprint. What all of them capture is a spot where one side overwhelmed the other so quickly that price skipped levels. Whatever term your charting community prefers, the practical takeaway is identical: mark the zone, watch how price reacts on the return, and confirm it with structure rather than relying on the label alone.

A Fair Value Gap (FVG) is a 3-candle price pattern where the wicks of the first and third candle don't overlap — leaving an unfilled "gap" on the middle candle. It marks an imbalance created when price moved so aggressively in one direction that it skipped over a range of prices. Traders watch these gaps because price often returns to "fill" them, making FVGs popular entry zones.

In one sentence: An FVG is the gap left between candle 1's wick and candle 3's wick when a big momentum candle (candle 2) blows through a price level — a zone of "unfair" pricing the market often revisits.

How to identify an FVG

Look at any three consecutive candles. The middle candle should be a large directional move. Then check:

Bullish FVG

Forms during an up-move. The gap is the space between the high of candle 1 and the low of candle 3. If candle 1's high sits below candle 3's low, that empty space is the bullish FVG. It tends to act as support when revisited.

Bearish FVG

Forms during a down-move. The gap is the space between the low of candle 1 and the high of candle 3. If candle 1's low sits above candle 3's high, that empty space is the bearish FVG. It tends to act as resistance when revisited.

The gap exists because the middle candle moved so fast that price never traded evenly through that zone. In auction-market terms, the market left "unfair value" behind — and markets tend to return to rebalance it.

How to trade a Fair Value Gap

The standard FVG trade is a retracement entry:

Identify the FVG in the direction of your higher-timeframe bias (only longs in a bullish trend, only shorts in a bearish trend).
Wait for price to retrace back into the gap zone. Don't chase the initial move — the edge is in the return.
Enter in the direction of the original move when price reacts at the FVG (often the 50% midpoint of the gap, called the "consequent encroachment" in ICT).
Stop-loss beyond the far edge of the gap (below a bullish FVG, above a bearish FVG).
Target the next liquidity pool, swing high/low, or opposing FVG. Aim for at least a 1:2 R-multiple.

FVGs work best with confluence — when the gap lines up with an order block, a liquidity sweep just before, or a key session level. An FVG alone is a weak signal; an FVG + order block + sweep at the same price is a high-probability setup.

How to mark a Fair Value Gap on your chart

Marking a fair value gap takes about ten seconds once you know what to look for. Find a strong three-candle move, then draw a box from the high of candle 1 to the low of candle 3 (for a bullish FVG — reverse it for bearish). That box is the gap. Extend it to the right: it stays relevant until price trades back through it. Most charting platforms make this trivial with a rectangle tool, and several have dedicated FVG indicators that auto-draw the boxes — useful for scanning, though marking them by hand trains your eye faster.

Two practical rules keep your chart clean: only mark FVGs created by impulsive moves (a gap inside chop is noise), and delete boxes once they're fully filled. If you journal your FVG trades with the gap's timeframe and whether it was partially or fully mitigated, you'll quickly learn which variants actually pay you — that's the difference between using FVGs and just drawing rectangles.

Common FVG mistakes

Assuming all gaps must fill. Many FVGs never get filled — especially in strong trends. Treat them as probability zones, not guarantees.
Trading FVGs against the higher-timeframe trend. A bullish FVG in a strong downtrend is low-probability. Always align with HTF bias.
Using FVGs as a standalone strategy. FVGs are one tool. Without confluence (order block, sweep, session timing), the win rate isn't there.
Ignoring gap size. Tiny FVGs on low-volume candles are noise. The meaningful ones come from genuine momentum candles with volume.

FAQ

Is a Fair Value Gap the same as an imbalance?

Yes — in ICT/Smart Money terminology they refer to the same thing: a price area the market moved through too fast to trade evenly, leaving inefficiency behind. "Imbalance" is the broader umbrella term for any one-sided delivery of price, while "FVG" points to the specific 3-candle formation you can measure between the first and third candle. You'll also see related labels like inefficiency, liquidity void, or BISI/SIBI describing the same footprint. All of them capture a spot where one side overwhelmed the other so quickly that price skipped levels without trading through them cleanly. Whichever word your charting community prefers, the practical job is identical: mark the zone, watch how price reacts when it returns, and confirm the reaction with market structure rather than trusting the label on its own. The name matters far less than how the level behaves in real time.

What timeframe works best for FVGs?

FVGs appear on every timeframe, from the monthly chart down to the 1-minute, because imbalance is fractal — the same 3-candle mechanics repeat at every scale. Day traders typically use higher timeframes (1h/4h) to set directional bias and lower timeframes (1-5min) to refine entries once price approaches a level. The higher the timeframe an FVG forms on, the more significant it tends to be, since it represents a larger, more meaningful imbalance that more participants can see and react to. A daily gap will usually get respected far more reliably than a 1-minute gap, which can be filled and forgotten within seconds. A practical workflow is to mark the HTF gap as your zone, then drop to the LTF for a cleaner entry inside it. There is no single "best" timeframe — the right one is whichever matches your trading style, session, and holding period.

Does the FVG concept actually work?

FVGs describe a real market phenomenon — imbalance and inefficiency left behind by fast, one-sided moves — so the underlying idea is sound rather than mystical. But a real phenomenon is not the same as a profitable edge. Like any concept, the edge depends entirely on execution, confluence, risk management, and how selectively you take the setups. The same gap can be a great trade in a trending market and a terrible one in chop. Beware anyone promising fixed win-rates from FVGs alone; those numbers depend on the trader, the instrument, and the conditions. The only way to know if FVGs work for you is to trade them with a defined rule set, journal every FVG entry, and measure the actual expectancy over a meaningful sample of 30 or more trades. That's what GridTrade is for — turning a chart concept into measurable, honest data.

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Related concepts: What is an Order Block · What is a Liquidity Sweep · Full trading glossary · What is R-multiple

Disclaimer: Educational content. Not financial advice. Trading carries substantial risk. FVG is a concept from ICT/Smart Money Concepts; no chart pattern guarantees profitable results.