Fair Value Gap (FVG)
An imbalance across three candles, leaving a price gap the market tends to come back and fill.
A Fair Value Gap (FVG) appears across a three-candle pattern, when the wick of the first candle and the wick of the third don’t overlap — leaving an untraded price "gap" between them, caused by the middle candle moving too fast.
This gap represents an area where supply and demand didn’t have time to balance normally. ICT theory holds that the market tends to come back and fill (at least partially) this imbalance before continuing on its way.
A bullish FVG forms during a fast upward move, a bearish FVG during a fast drop. Traders use them as potential entry zones on a pullback, or as profit-taking targets.
How to spot one: take three consecutive candles. If the low of the third stays above the high of the first, the space between them is a bullish fair value gap. Mirrored, if the high of the third stays below the low of the first, it is a bearish FVG. There is nothing to interpret: it is a geometric measurement, which makes it one of the few perfectly objective ICT concepts.
What it means: inside that interval price moved so fast that no balanced exchange took place between buyers and sellers. Part of the order flow went unfilled. The ICT assumption is that the market tends to come back and fill that imbalance before continuing — hence the term rebalancing.
How to trade it? An FVG is used as a pullback entry zone, in the direction of the move that created it. Many traders target the middle of the gap rather than its far edge: a reasonable compromise between being filled too early and never being filled at all. The stop goes beyond the gap, never inside it.
An FVG combined with an order block on the same area is one of the most sought-after confluences in the method. When the last opposite candle before the impulse coincides with the imbalance left by that impulse, both readings point at the same price.
The classic mistake: treating every gap as tradable. Charts are covered in them, especially on low timeframes. An FVG only deserves attention if it was created by a significant move, ideally the one that produced a structure break, and if it is still intact.
Second trap: demanding a complete fill. Price frequently turns after filling half or two thirds of the gap. Waiting for the perfect fill means watching a good share of valid setups go by.