A fair value gap is a three-candle pattern where the first candle's wick and the third candle's wick do not overlap, leaving a price range that traded in one direction only. It marks an imbalance — an area price moved through too fast for two-sided trade — and price frequently returns to complete it.
- 1Displacement leaves the imbalance
- 2Return trades back through it
What the engine actually checks
“Looks like one” is not a rule. Detection requires every hard criterion and scores the confluences — fail a hard criterion and it is not this setup, it is a hope with a nickname.
Hard criteria — all required
- ▪Three consecutive candles where candle one's wick and candle three's wick do not overlap.
- ▪The middle candle showing genuine displacement rather than a slow drift.
- ▪The gap unfilled at time of detection.
Confluences — weighted, not required
- ▫Gap size relative to ATR — very small gaps are noise, very large ones fill partially.
- ▫The displacement broke a structural point.
- ▫Gap sitting in the discount half of the dealing range for a long.
Trading it
- 1Where you are wrongFor a fill trade, a close beyond the far edge of the gap. The imbalance is the whole thesis; once price has traded fully through it and kept going, the area has been rebalanced and there is nothing left to return to.
- 2EntryEither at the gap on the return (treating it as a level), or on the reaction after a partial fill. The important distinction is that a gap is a zone rather than a line — entering at its far edge and entering at its near edge are different trades with different stops.
- 3ObjectiveGaps are used as targets at least as often as entries: an unfilled gap above price is somewhere price has demonstrated it can travel quickly. Treating them as objectives rather than as entries is the less crowded and frequently the more useful application.
Worked example — real numbers
entry at the gap edge, stop beyond the imbalance, target at the prior high. A valid formation offering under about 1.5R is still a valid formation and still not worth taking — valid and worth it are different questions.
Size this trade against your account →The scoreboard
Resolution by grade, market and timeframe — because a single blended number would let strong contexts carry weak ones, which is how every invented “success rate” in this category is constructed.
| Grade | Market | Timeframe | Resolution | Sample |
|---|---|---|---|---|
| A | Commodities | 15m–1H | collecting | no resolved sample yet |
| A | Commodities | 4H | collecting | no resolved sample yet |
| A | Crypto | 15m–1H | collecting | no resolved sample yet |
| A | Crypto | 4H | collecting | no resolved sample yet |
| A | FX | 15m–1H | collecting | no resolved sample yet |
| A | FX | 4H | collecting | no resolved sample yet |
| B | Commodities | 15m–1H | collecting | no resolved sample yet |
| B | Commodities | 4H | collecting | no resolved sample yet |
| B | Crypto | 15m–1H | collecting | no resolved sample yet |
| B | Crypto | 4H | collecting | no resolved sample yet |
| B | FX | 15m–1H | collecting | no resolved sample yet |
| B | FX | 4H | collecting | no resolved sample yet |
| C | Commodities | 15m–1H | collecting | no resolved sample yet |
| C | Commodities | 4H | collecting | no resolved sample yet |
| C | Crypto | 15m–1H | collecting | no resolved sample yet |
| C | Crypto | 4H | collecting | no resolved sample yet |
| C | FX | 15m–1H | collecting | no resolved sample yet |
| C | FX | 4H | collecting | no resolved sample yet |
Where this traps people
Drop your chart and the engine checks it against the same hard criteria listed above — the ones it uses on every scan. First read is free and needs no account.
Questions traders actually ask
- What is a fair value gap?
- A three-candle formation where the outer two candles' wicks leave a range that never traded in both directions. It marks an imbalance created by one-sided movement, and price returning to that range is the behaviour the setup trades.
- Do fair value gaps always fill?
- No. The claim that they always do is survivorship bias — filled gaps are memorable, open ones are forgotten. In strong trends imbalances stay open for long periods, and treating a fill as inevitable is how traders end up fading momentum.
- What is the difference between an FVG and a regular gap?
- A conventional gap is a break between one session's close and the next session's open, so it needs a market that closes. A fair value gap forms within continuous price action from three consecutive candles, which is why the concept works in crypto and FX where sessions do not close.
- How do you trade a fair value gap?
- Either as an entry when price returns to it, or as a target when one sits open in the direction you are already trading. The second use is less crowded and generally more reliable, because it does not require the gap to hold as support.
- What is an inverse fair value gap?
- A gap that price traded fully through, after which the same range is treated as a level in the opposite direction — a bullish gap that failed becomes resistance. It is a reasonable idea and a considerably thinner-sample one, so it is scored separately.
Related setups
Learn it · scan for it
More in Smart Money Concepts
Find a fair value gap on your own chart
The criteria above are the ones the engine runs. Point it at a symbol you care about and see whether what you are looking at actually qualifies — free, and without an account.
Grade a chart free