Fair Value Gaps (FVG)

Fair Value Gaps are imbalances in price that the market often returns to fill.

What is a Fair Value Gap?



Definition

• A three-candle pattern
• Gap between wick of first and third candle
• Middle candle body doesn't overlap

Why They Form

• Aggressive buying/selling
• Imbalance in orders
• Price moves too fast

Why They Fill

• Market seeks equilibrium
• Unfilled orders in the gap
• Price returns to "fair value"

Bullish FVG (BISI)

Formation

• Strong bullish candle in middle
• Gap between candle 1 high and candle 3 low
• Buying Imbalance Selling Inefficiency

Trading It

• Wait for price to retrace
• Enter when price enters the gap
• Stop below the FVG
• Target structure high

Bearish FVG (SIBI)

Formation

• Strong bearish candle in middle
• Gap between candle 1 low and candle 3 high
• Selling Imbalance Buying Inefficiency

Trading It

• Wait for price to retrace
• Enter when price enters the gap
• Stop above the FVG
• Target structure low

FVG Fill Levels

Consequent Encroachment (CE)

• 50% of the FVG
• Most common fill level
• Best entry point

Full Fill

• Price fills entire gap
• Complete rebalancing
• May continue beyond

Partial Fill

• Price enters but doesn't complete
• Still valid for entry
• Remaining gap may fill later

FVG as Entry Model

Step 1: Identify Trend

• HTF structure direction
• Only trade with trend

Step 2: Wait for FVG

• Look for impulse move
• Identify the gap

Step 3: Enter on Retracement

• Price returns to FVG
• Enter at 50% or full gap
• Set stop beyond gap

Step 4: Target

• Next swing point
• Next liquidity level
• Next order block

FVG + Order Block Confluence

Powerful Setup

• FVG overlaps with OB
• Double confirmation
• Higher probability

Trading It

• Enter where they overlap
• Tighter stop possible
• Same target rules apply

Inversion FVG

Concept

• After FVG is filled
• It can act as support/resistance
• Previous resistance becomes support

Trading It

• Wait for fill
• Look for reaction
• Enter on retest

Timeframe Matters

HTF FVGs

• More significant
• Stronger reactions
• May take days to fill

LTF FVGs

• Entry timing
• Quick fills
• Within HTF context

Key Rules

1. Only trade FVGs in trend direction
2. Look for FVGs after BOS
3. CE (50%) is the sweet spot
4. Combine with OBs for best setups
5. Have patience - let price come to you