Fair Value Gap
A fair value gap is a three-candle imbalance where the wicks of candle one and candle three do not overlap, leaving an unfilled zone. Roughly 78% of FVGs on the 1-hour and above fill within 20 candles. Traders place a limit at the 50% mark with a stop 1–3 ATR beyond the far boundary.
◆Full guide: Fair Value Gaps (FVG): The Complete Trading Guide
What it means
A Fair Value Gap (FVG), also known as an imbalance or liquidity void, is a three-candle price pattern where the wicks of the first and third candles fail to overlap. The middle candle is almost always a strong displacement candle that moved price too aggressively for the resting limit-order book to absorb, leaving a textual gap on the chart. This empty zone is the FVG.
FVGs originate from ICT (Inner Circle Trader) methodology and are conceptually identical to what Wyckoff traders call a Sign of Strength bar and what classical price-action traders call an imbalance. The terminology differs across schools, but the chart event is the same.
The institutional logic is straightforward: when a desk needs to fill size faster than the order book can supply, their algorithms cross the spread aggressively, leaving displacement and an FVG behind. The FVG is the readable footprint of that urgency. Roughly 78% of FVGs on the 1-hour timeframe and above get filled within 20 candles, and 91% within 50 candles. This high return rate is what makes FVGs one of the highest-probability entry zones in SMC trading.
Standard execution: place a limit order at the 50% mark (Consequent Encroachment, or CE) of the FVG, with a stop-loss 1–3 ATR beyond the far boundary. Take-profit targets at the next significant liquidity pool. Conservative traders wait for a rejection candle at the FVG boundary before entering instead of using a passive limit.
How to identify it on a chart
- Find a three-candle sequence with a large middle candle.
- If the high of candle 1 and the low of candle 3 do not overlap (bullish), the space between them is the gap.
- Trade the first return into the gap; a full close through it inverts it into resistance.
Worked example
On BTC 15m, candle 1 tops at 64,100, the impulse candle runs 400 points, candle 3 bottoms at 64,300. The 200-point space is the FVG; price returns two hours later, taps 64,200 and resumes higher.
See it on the chart, read it in depth
Frequently asked questions
What percentage of Fair Value Gaps get filled?
Approximately 78% of FVGs on the 1-hour timeframe and above are filled within 20 candles, rising to 91% within 50 candles. Higher-timeframe FVGs (4H, daily) have even higher fill rates because they represent larger institutional imbalances.
Should I enter at the top, middle, or bottom of an FVG?
The standard ICT entry is at the 50% mark of the FVG (the Consequent Encroachment) for optimal risk-to-reward. Conservative traders wait for a rejection candle at the far boundary before entering. Aggressive traders enter at the near boundary for maximum R:R but accept lower fill rates.
Can FVGs invert and act as resistance after being filled?
Yes. This is called FVG inversion. Once a bullish FVG is fully filled and price breaks below it with displacement, the same zone often acts as resistance on the next test. This is the basis of the FVG inversion model covered in the advanced FVG lesson.
Related terms
See Fair Value Gap on your TradingView chart
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