Trading glossary

Fair value gap (FVG): meaning in trading

A fair value gap is a gap between three candles where price moved so fast that buying and selling were one sided.

Look at three candles in a row. If the first candle’s high is below the third candle’s low (in a move up), the space between them is a fair value gap, also called an imbalance.

Price often comes back to fill part of the gap. Some traders use that as an entry area for the pullback after a change of character.

Like order blocks, gaps are everywhere on a chart. They work best as a refinement of a setup that already has a reason to exist.

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