Understanding Fair Value Gaps
Posted: Sun Aug 02, 2026 2:24 am
Understanding Fair Value Gaps (FVGs)
Fair Value Gaps (FVGs), often called FVGs, are one of the most popular concepts used by price action traders. A Fair Value Gap occurs when price moves aggressively in one direction, creating an imbalance between buyers and sellers. This rapid movement can leave an area on the chart where very little trading activity occurred.
Many traders believe that markets tend to revisit these imbalanced areas before continuing their larger trend. Because of this, FVGs are often used as potential zones for entries, exits, or profit targets.
A bullish Fair Value Gap forms when a strong upward move leaves a gap between the high of the first candle and the low of the third candle. A bearish Fair Value Gap forms when a strong downward move leaves a gap between the low of the first candle and the high of the third candle.
Common Uses for Fair Value Gaps
Do you trade using Fair Value Gaps?
Share your charts, favorite setups, or any tips you've learned while trading FVGs. We'd love to hear how you incorporate them into your strategy!
Fair Value Gaps (FVGs), often called FVGs, are one of the most popular concepts used by price action traders. A Fair Value Gap occurs when price moves aggressively in one direction, creating an imbalance between buyers and sellers. This rapid movement can leave an area on the chart where very little trading activity occurred.
Many traders believe that markets tend to revisit these imbalanced areas before continuing their larger trend. Because of this, FVGs are often used as potential zones for entries, exits, or profit targets.
A bullish Fair Value Gap forms when a strong upward move leaves a gap between the high of the first candle and the low of the third candle. A bearish Fair Value Gap forms when a strong downward move leaves a gap between the low of the first candle and the high of the third candle.
Common Uses for Fair Value Gaps
- Identifying potential support and resistance zones.
- Looking for pullback entries within an existing trend.
- Combining FVGs with market structure and liquidity levels.
- Finding areas where price may react after an impulsive move.
- Using FVGs as potential profit-taking or stop-loss placement areas.
- Price breaks above a previous resistance level with three strong bullish candles.
- A Fair Value Gap is created during the move.
- Price later pulls back into the gap.
- Buyers step back into the market and the uptrend resumes.
- Price breaks below a key support level with strong selling pressure.
- A bearish Fair Value Gap is left behind.
- Price rallies back into the gap.
- Sellers defend the area and the downtrend continues.
- The market is making higher highs and higher lows.
- Rather than chasing price, traders wait for a retracement into a bullish FVG.
- The gap acts as a discount area before the next leg higher.
- Price revisits an old Fair Value Gap but fails to continue.
- Strong rejection candles appear inside the gap.
- Combined with a break in market structure, this may signal a possible trend reversal.
- Not every Fair Value Gap will be filled.
- Larger time frame FVGs often carry more significance than smaller ones.
- Strong trends may only partially fill a gap before continuing.
- Always combine FVGs with other technical analysis tools rather than relying on them alone.
- Proper risk management is more important than any single trading concept.
Do you trade using Fair Value Gaps?
Share your charts, favorite setups, or any tips you've learned while trading FVGs. We'd love to hear how you incorporate them into your strategy!