M4 · L1Fair Value Gaps
What Is a Fair Value Gap?
A Fair Value Gap is a gap in price where not enough buyers and sellers traded — price will come back to fill it.
What This Means
When price moves very aggressively in one direction, it sometimes skips over a price range without both buyers and sellers transacting there. This leaves an imbalance — called a Fair Value Gap (FVG). Markets tend to return to these gaps to 'fill' them, because banks have unfilled orders there. On a chart, an FVG appears as three candles where the middle candle's range doesn't overlap with the first or third candle.
Visual
The Rule
An FVG exists between the high of candle 1 and the low of candle 3. Price almost always fills this gap.
COPY THIS
Do these steps exactly1
Find 3 consecutive candles where the middle candle is very large
2
Check: does the high of candle 1 reach the low of candle 3?
If there is a GAP between them — that is the FVG
3
Draw a box between: top of candle 1 high and bottom of candle 3 low
4
That box is your FVG zone — label it 'FVG'
5
Expect price to return to this zone in the future
Common Mistake
Very small FVGs (1-2 pips) are not worth trading. Look for FVGs that are at least 5-10 pips wide.