What Is a Fair Value Gap (FVG) in Trading?

A fair value gap (FVG) is a three-candle pattern that marks an imbalance — a zone where price moved so quickly in one direction that it left a gap between the wick of the first candle and the wick of the third. Traders in the smart money concepts (SMC) framework watch these zones because price often, though not always, returns to "fill" part of the gap later. Educational, not financial advice.

How to spot a fair value gap

Look at three consecutive candles during a strong move:

1. A first candle.
2. A large middle candle in the direction of the move.
3. A third candle whose wick does not overlap the first candle's wick.

The un-overlapped space between the first candle's wick and the third candle's wick is the fair value gap — the imbalance left behind by the fast move.

Why traders watch FVGs

The idea is that a rapid move traded through a price zone without much two-sided activity, leaving unfilled orders. Traders watch for price to revisit that zone, where they then look for their own confirmation before acting. An FVG is a zone of interest, not a trade on its own — it marks where to pay attention, not what to do.

The honest limits

• Not every gap fills, and there is no rule for when. Treating "price must return" as a certainty is where people get caught.
• FVGs appear on every timeframe, so a gap on a 1-minute chart means far less than one on a daily chart — context decides relevance.
• Used alone, they generate a lot of noise. Most traders combine them with market structure and a break of structure or change of character for context.

Where FVGs fit in smart money concepts

An FVG is one of several imbalance and liquidity ideas in SMC, alongside order blocks and premium and discount zones. Our Smart Money Concepts course covers how they connect — as a way to read where price is likely to react, always confirmed by structure, never as a guaranteed outcome.

Takeaway

A fair value gap marks an imbalance left by a fast move — a zone price may revisit. Treat it as one input for where to look, confirm it against market structure, and stay honest that not every gap fills.

Educational only — not financial advice. Nothing here is a recommendation to buy or sell.