Fair Value GapFVG
A fair value gap (FVG) is usually defined as a three-candle sequence where the middle candle moves so fast that the wicks of the first and third candles do not overlap.
A fair value gap (FVG) is a term from Smart Money Concepts (SMC) and ICT-style trading. It marks a spot on the chart where price moved so fast that, across three candles, the wicks of the first and third candles do not overlap. Traders watch to see whether price comes back to that gap later. It is a theory used by some traders, not a proven rule.
- Category
- Price Action
- Reading time
- 3 min
- Also called
- Imbalance, Price inefficiency
- Updated
Fair value gap in plain words
A fair value gap forms when price races in one direction so fast that it leaves a hole between candle wicks.1
Across three candles, there is a gap when the first candle's wick and the third candle's wick don't overlap.1
Price often comes back into the gap before moving on, which is why some traders mark these zones.2
How to mark a fair value gap
Find a fast move
Look for a strong, wide candle in one direction.
Take three candles
Use the candle before, the big candle and the candle after.
Check the wicks
Check the three-candle rule: the first and third candles' wicks must not touch.1
Mark the zone
For a bullish gap, the zone runs from candle 1's high to candle 3's low.2
Check the timeframe
Give more weight to gaps on higher timeframes; they tend to pull price and shape lower-timeframe setups.2
Plan, then wait
Decide entry, stop and size before price returns; it may never come back.
Worked examples
Example 1 — Bullish gap
Zone 100–103Hypothetical candles: candle 1 high 100, candle 3 low 103.
| Gap | 100 to 103 |
| Size | 3 points |
The zone runs from candle 1's high to candle 3's low: 100–103.2
Example 2 — Retest
+6.5Hypothetical: price later dips to 101.5 inside the gap, then rises to 108.
| Entry | 101.5 |
| Exit | 108 |
| Move | +6.5 |
Price dipped back into the gap before continuing higher, as it often does.2
Example 3 — No overlap check
No FVGHypothetical candles: candle 1 high 50, candle 3 low 49.
| Overlap | Yes |
The first and third wicks overlap here, so there is no gap.1
Fair value gap vs price gap
| Aspect | Fair value gap | Classic price gap |
|---|---|---|
| Candles | Three | Two |
| Defined by | Wicks not overlapping | Open away from prior close |
| Common in | SMC/ICT analysis | All chart analysis |
| Proof | Theory | Visible on chart |
Where traders use it
Pullback entries
Waiting for a Pullback into the gap.
Stops
Setting a Stop Loss beyond the gap.
Multiple timeframes
Checking the higher Timeframe.
Combining tools
Using it with Support and Resistance.
Advantages and disadvantages
Advantages
- Gives a clear, rule-based zone.
- Easy to mark on any chart.
- Helps plan pullback entries.
Disadvantages
- Price does not always return.
- Many small gaps create noise.
- Marking zones is subjective.
- The theory behind it is unproven.
Going deeper
Read as far as you need. Each level builds on the one before it.
Definition
Beginner
The gap is the footprint of a fast, one-sided move.1
Bullish vs bearish
Intermediate
In a bullish gap, candle 3's wick stays above candle 1's high; a bearish gap is the mirror image.2
Limits
Advanced
Spotting gaps, order blocks and liquidity zones involves judgment, so use FVGs as one input, not a signal on their own.1
Common mistakes
Marking every tiny gap
Focus on clear, fast moves.
Ignoring the trend
Check the bigger timeframe.
Assuming a fill
Price may never return.
No stop
Set a stop beyond the zone.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- An FVG is a three-candle zone where wicks do not overlap.
- It comes from SMC and ICT-style trading.
- Price sometimes returns to the gap.
- Higher-timeframe gaps get more weight.
- It is subjective and not a guarantee.
Frequently asked questions
Is an FVG the same as a price gap?
Do FVGs always get filled?
Does it work on crypto and forex?
Further learning
- Price Gap
Classic price gaps.
- Candlestick
Reading wicks.
- Pullback
Retest entries.
- Order Flow
Who is pushing price.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- CMC Markets. Smart money concept explained (opens in a new tab) Checked .
- Equiti. Fair Value Gap (FVG): a full guide for ICT traders (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.