Fair value gap (FVG)
Also called: FVG, Imbalance, Price imbalance, Inefficiency, Fair value gap, Dengesizlik
In a fast move, the area left by the middle of three candles where the first and third candles' wicks don't overlap; price passed through one way.
4 min read · one puzzle on the page
What is a fair value gap?
A fair value gap, or FVG, appears in a run of three candles. The middle one is long and fast. The first candle's high and the third candle's low don't touch; between them is an area only the middle candle's body passed through. That area is called an FVG, or an imbalance.
What it measures is that price went through that range very quickly and in one direction. On that timeframe there was little two-way trading there. That's why price is thought to tend to come back later and fill part of it.
The fair value in the name overstates things. A chart can't tell you whether a price was fair. All you see is a thin area left behind a fast move. It's healthier to read an FVG as an address to watch on a pullback, not as a magnet.
How do you find an FVG on a chart?
Find a fast rally and pick its longest candle. Look at the high of the candle before it and the low of the candle after it. If that earlier high is below the later low, the space between them is a bullish FVG. In a decline it's the reverse.
An example: data is released on EUR/USD. The candle before the data has a low of 1.0830 and a high of 1.0848. The data candle runs from 1.0846 to 1.0902. The next candle's low is 1.0878 and price stretches to 1.0910. The FVG is 1.0848 to 1.0878: a 30-pip area with a midpoint at 1.0863.
Then price pulls back to 1.0868. About half of the move from 1.0830 to 1.0910 has been given back, and price is inside the FVG. If you're thinking about a buy, the first job is not to rush. You wait for a close inside the area that shows buyers returning, such as a candle closing above 1.0874.
The invalidation is the bottom edge of the FVG: a close below 1.0848 means the area the fast move left has been fully taken back. The stop goes to 1.0844. From 1.0874 that's 30 pips of risk, your 1R. The old high at 1.0910 is only 36 pips away, about 1.2R; anything more needs the rally to continue.
Try it on a chart
No FVG box is drawn on this chart. After the data there's a fast move, and price is now giving back part of it; the FVG idea is about exactly that quickly crossed area. Look at how far into the move the pullback goes, what candles it leaves there, and where a stop could rest.
The data is out. Your turn: read the chart and make your call.
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The usual mistake: assuming every gap fills
Some FVGs never get filled. In a strong trend price leaves a gap behind and simply keeps going. Assuming every FVG will fill and trading against the move is swimming against the current.
The second mistake is entering on the first touch. Buying because price tagged the top of the gap assumes you know which part of the area will react. Sometimes price turns at the edge, sometimes at the midpoint, sometimes it fills the whole thing. Waiting for a confirming candle costs a little price but puts your stop on a real close instead of a guess.
The third is hunting FVGs on every timeframe. On a 1-minute chart every quick candle leaves a small gap and the screen fills with boxes. Clear gaps on a higher timeframe, created by news or a sharp break of structure, carry far more meaning.
When does an FVG not work?
If price closes through the FVG with a body and beyond its far edge, the read is over. The area the fast move left has been fully reclaimed and the move has failed. Redrawing the area and looking for a new entry at that point just stretches a losing idea.
Be careful with news moves. A spike on data leaves a big FVG, but the first reaction to a release can be fully reversed within minutes. Then the gap isn't support, just the trace of a move that turned around.
In a sideways market FVGs are weak too. A fast candle inside a range runs to the other edge and comes back; the gap it leaves says nothing about direction. And check the bigger chart: if H4 is falling, you need a strong reason to trust a bullish FVG on M5.
Frequently asked questions
How do you identify a fair value gap?
Look at a run of three candles. In a rally, if the first candle's high is below the third candle's low, there's an area only the second candle's body passed through; that's a bullish FVG. In a decline, if the first candle's low is above the third candle's high, it's a bearish FVG. Mark the area from the first candle's wick to the third candle's wick.
Do fair value gaps always get filled?
No. Price often comes back to these areas, but there's no guarantee. In strong trends some gaps stay open for weeks and some never fill. Sometimes price only touches the top part and turns. It's more accurate to read an FVG as an area where a pullback might react, not as a place price must return to.
What is the difference between an FVG and a normal price gap?
In a normal gap, for example after the weekend, nothing trades between one candle's close and the next one's open, and you see real empty space on the chart. In an FVG the candles are continuous; the gap only comes from the first and third candles' wicks not overlapping. Price did trade in that range, just very fast and one way.
