Fair Value Gaps
A price imbalance that marks an area where price moved with strong momentum and created an untraded zone.
What It Does
A Fair Value Gap, or FVG, is a price imbalance created when the market moves quickly through an area and leaves limited overlap between a three-candle sequence. The gap marks an area where price moved with strong momentum and where relatively little two-way trading occurred.
How to Use It
Identify a strong price displacement and look at the three-candle structure around the move. When the first and third candles leave an untraded or lightly traded area between them, that area can be marked as a Fair Value Gap.
Traders may watch the zone later for:
- • Price returning into the gap
- • Rejection from the area
- • Support or resistance
- • Continuation through the zone
- • Partial fills
- • Full fills
- • Failure of the zone
- • Confluence with market structure, volume, trend, or other important levels
A Fair Value Gap does not guarantee that price will return to the zone, completely fill it, or reverse from it. Use FVGs as areas of interest within the larger market structure rather than automatic trade signals.
Video Lesson
A video lesson demonstrating Fair Value Gaps in action will be added soon. Check back later for step-by-step examples of how to use this tool effectively in your chart analysis.