Fair Value Gaps (FVGs): Formation, Filtering, and Trading Mechanics
Master Fair Value Gaps from theory to execution. Learn why FVGs form, the 5-point quality filter, precise entry mechanics, and common mistakes to avoid.
📚 Related Resources
- Continue learning with our FVG masterclass with advanced techniques.
- Master advanced FVG concepts: inversion and CE.
- For execution-focused strategies, read our practical FVG trading guide.
A Fair Value Gap (FVG) is a three-candle imbalance where price moved so fast in one direction that it left a gap with no two-sided trading — and institutions often return price to that gap to "rebalance" before continuing. This lesson is the beginner-friendly foundation; for the full strategy library, types, and quizzes, see the in-depth Fair Value Gaps Complete Trading Guide.
What a fair value gap actually is
An FVG, also called an imbalance, forms across three candles. In a bullish FVG, the gap is the space between the high of the first candle and the low of the third candle, created by a large middle candle. That empty space represents inefficient delivery — aggressive buying left orders unfilled — and price tends to revisit it.
How to spot one (3-candle pattern)
Bullish FVG
Find a strong up-candle with a candle on each side. If the wick of the candle before does not overlap the wick of the candle after, the space between them is a bullish FVG. It becomes a demand zone price may dip into before rising again.
Bearish FVG
The mirror image: a strong down-candle whose neighbours leave a gap between the low of the first and the high of the third. It becomes a supply zone price may rally into before falling.
Why price fills the gap
Markets seek efficiency. A gap is a record of one-sided order flow; institutions frequently return price to fill resting orders and rebalance the inefficiency before the next leg. A fresh, unfilled gap that aligns with higher-timeframe bias and follows real displacement is the highest-quality kind.
Trading an FVG simply
The beginner playbook: identify HTF bias, find a fresh FVG in the direction of that bias, wait for price to tap the gap, look for a lower-timeframe change of character confirming the reaction, then enter with a stop beyond the gap. Combine with an order block for confluence. The deep guide covers five full strategies.
FVG quality: not every gap is worth trading
The gaps worth trading are created by genuine displacement away from a level — a sharp, decisive move — not slow, overlapping candles. A gap that forms as price leaves a higher-timeframe order block or sweeps liquidity carries real institutional intent; a random three-candle gap in a quiet range does not. Filter ruthlessly and prioritise higher-timeframe gaps, because an HTF gap with order-block confluence is far more likely to be respected.
When a gap inverts
A fair value gap is not permanent support or resistance. When price closes decisively through a gap instead of respecting it, the gap inverts and flips polarity — a former bullish gap becomes resistance, and a former bearish gap becomes support. So watch the reaction rather than assuming the gap holds: a respected gap offers an entry in the original direction, while a reclaimed gap offers a high-quality setup in the opposite one.
Frequently asked questions
What is a fair value gap in trading?
A fair value gap is a three-candle imbalance — a price range that traded in only one direction so quickly it left no overlap between the first and third candle's wicks. It marks inefficient order delivery, and price often returns to rebalance it before continuing.
Do fair value gaps always get filled?
No. Many do, but not all — gaps against the higher-timeframe trend or formed without genuine displacement are less reliable. Trade only fresh gaps aligned with HTF bias, and always confirm with a structure break before entering.
Key takeaway
An FVG is a 3-candle imbalance price tends to rebalance. Trade fresh gaps in line with HTF bias, confirm with a structure break, and read the deep guide for the full five-strategy playbook.