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What is a fair value gap (FVG)?
A fair value gap is a three-candle imbalance: a stretch of price that only the middle candle traded. This guide shows how to spot bullish and bearish gaps, the parts of a gap traders mark, and how a fair value gap differs from an inversion fair value gap.
The three candles
Take three candles in a row. In a bullish fair value gap, the third candle’s low is above the first candle’s high. The middle candle moved up so far that the candles either side of it never overlap, and the space between the first candle’s high and the third candle’s low is the gap.
A bearish fair value gap is the mirror image: the third candle’s high is below the first candle’s low, and the gap runs from the third candle’s high up to the first candle’s low.
On a live chart, three candles meet this rule all the time, so a gap a tick tall counts as much as one that spans a whole move. Our free indicators filter by size, measured against the candles that formed each gap, and skip gaps that straddle the weekend open.
What happens to a gap afterwards
Filled. When price comes back into a gap, it is filling it: a wick into its midpoint is a half fill, and trading all the way through it is a full fill. A gap price has closed through is finished as a gap.
Inverted. When price closes through a fair value gap, it flips. A former area of support starts acting as resistance, and the other way round. That flipped gap is an inversion fair value gap (iFVG).
Reclaimed. Sometimes price then takes an inverted gap back: it closes through it again in the gap’s original direction. That is a reclaimed fair value gap.
Balanced. When a bullish and a bearish gap overlap, the shared zone is a balanced price range (BPR): the region between an inverted gap and the new gap that caused the inversion. If the two gaps share no price, there is no BPR.
The 50% of a gap: consequent encroachment
The midpoint of a fair value gap is its consequent encroachment, or CE: the level halfway between the gap’s top and bottom. It is the level inside a gap that price gets studied at, so it is often drawn on its own, as a line instead of a box.
A gap can be split further, into quadrants at 0, 25, 50, 75 and 100 percent, to read how deep into it price trades. Our inversion, reclaimed and balanced-range indicators draw these lines inside each zone.
Which gaps: timeframe and timing
Higher-timeframe gaps. A gap on the 15-minute or hourly chart is easy to lose on the 1-minute chart you execute on. Projecting the nearest unfilled higher-timeframe gap above and below price onto that chart keeps it in view without flipping timeframes. Gaps are read from finished higher-timeframe candles, so one doesn’t appear mid-candle and disappear again.
The first presented fair value gap. The first gap of the New York session after 9:30 is an ICT concept of its own, a level price is watched for returning to. A gap on the 9:30 candle itself doesn’t count. The afternoon has its own version: the first gap after 1:30 PM.
Fair value gap vs inversion fair value gap
A fair value gap (FVG) is the imbalance as it forms. An inversion fair value gap (iFVG) is the same gap after price has closed through it, read the other way round: a bullish gap that fails becomes bearish, and a bearish one bullish.
- FVG: three candles, the first and third not overlapping. Bullish below price as support, bearish above as resistance.
- iFVG: a gap price has closed through. The old support now acts as resistance, or the old resistance as support.
- Reclaimed FVG: an iFVG that price closes back through in the gap’s original direction.
iFVG Ultimate+ watches for that inversion after a liquidity sweep and treats it as its entry model.
Free indicators that mark each part
- HTF FVG: Higher-timeframe gaps projected onto the chart you trade: up to five timeframes, the nearest unfilled gap above and below price on each.
- HTF CE: Only the 50% midpoint (consequent encroachment) of each higher-timeframe gap, as a clean line.
- Inversion FVG: The moment a gap inverts to the opposite character, confirmed on the close.
- Reclaimed FVG: Every gap followed through inversion, reclaim and invalidation.
- HTF BPR: Where an inverted gap and the gap that caused the inversion overlap: the balanced price range.
- First Presented FVG: The first gap of the New York session after 9:30, and the first after 1:30 PM.
- iFVG guide: Four tips for trading inversion fair value gaps, as a free PDF.
Educational content. A fair value gap describes what price did; it doesn’t predict what price will do. Futures trading involves substantial risk of loss. See our risk disclosures.