A fair value gap (FVG) is a three-candle pattern marking a price imbalance - the gap between the first candle's wick and the third candle's wick when the middle candle moves so fast that price skips a range. The theory is that this inefficiency is often revisited, so the gap acts as a magnet and a potential entry in the direction of the move that created it.
How to spot a fair value gap
Look at any three consecutive candles during a strong move. If there is empty space between the high of the first candle and the low of the third (in an up-move), the middle candle raced through that zone without trading it evenly. That untraded space is the gap - the "inefficiency" the market may return to correct. In a down-move, the gap sits between the first candle's low and the third candle's high.
Do gaps always fill?
No - and believing they must is how traders get hurt. Many fair value gaps are at least partially revisited, especially those against a short-term move within a larger trend, but plenty are never touched. "The gap must fill" is a tendency, not a law. You trade it as a probability with a defined stop, never as a sure thing you can average into.
Trading a fair value gap
The clean setup is to wait for price to retrace into the gap and enter in the direction of the impulse that made it, with a stop beyond the gap or the nearby structure. FVGs are strongest as confirmation, not as a standalone signal - a gap that lines up with an order block, a trend, or a liquidity sweep inside the broader smart money framework is far more useful than one traded in isolation.
Important: a fair value gap is a description of what already happened, not a prediction. Its value is as one input among several, sized with proper risk and a stop - not as a reason to hold a losing trade because "it has to come back."
Backtest the tendency, don't assume it
Whether FVGs help your pair and timeframe is a measurable question. Define what qualifies as a tradable gap, then replay charts bar by bar in a simulator, marking gaps as they form and taking every return your rules define. The expectancy across 100+ trades tells you whether the imbalance is a real edge or just a pattern you notice in hindsight.
Fair value gap FAQ
What is a fair value gap?
A three-candle imbalance - the gap between the first and third candles' wicks when the middle candle moves so fast it skips a price range, often revisited later.
Do fair value gaps get filled?
Many are at least partially revisited, but not all and not on a schedule. Treat it as a tendency to trade with a stop, not a guarantee.
How do I trade one?
Enter on the retrace into the gap in the impulse's direction, with a stop beyond it, ideally alongside a trend, order block, or sweep - then backtest it.