What is a Fair Value Gap?

A Fair Value Gap happens when there is a strong move up or down, usually caused by aggressive buying or selling.

When this happens, price can “skip” through a zone too quickly, leaving a gap between candles.

Traders watch these areas because they often act like:

• pullback zones

• entry zones

• support/resistance

• institutional interest areas

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How to Identify an FVG

Most traders use a 3-candle model.

1) Bullish FVG

A bullish FVG appears during a strong move upward.

You look at:

• Candle 1 high

• Candle 3 low

If there is a gap between them, that is a Bullish Fair Value Gap.

Meaning:

Price moved up with strong momentum, and the market may later come back into that zone before continuing higher.

Example:

• Candle 1 high = 100

• Candle 3 low = 105

Then the zone between 100 and 105 is the bullish FVG.

That area may later act as a buy zone.

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2) Bearish FVG

A bearish FVG appears during a strong move downward.

You look at:

• Candle 1 low

• Candle 3 high

If there is a gap between them, that is a Bearish Fair Value Gap.

Meaning:

Price dropped with strong momentum, and the market may later return to that zone before continuing lower.

Example:

• Candle 1 low = 200

• Candle 3 high = 195

Then the zone between 195 and 200 is the bearish FVG.

That area may later act as a sell zone.