Fair Value Gaps (FVGs)
Overview
A Fair Value Gap is a three-candle pattern where the wicks of candle 1 and candle 3 do not overlap, creating an imbalance or gap in price. FVGs represent areas where price moved so aggressively that there was insufficient opposite-side liquidity. Price tends to retrace into FVGs before continuing, making them excellent entry zones.
Key Concepts
Three-candle pattern with a gap between candle 1 wick and candle 3 wick, Bullish FVG: gap above between candle 1 high and candle 3 low. Bearish FVG: gap below between candle 1 low and candle 3 high. Consequent encroachment: 50% of the FVG. Inversion FVGs: when a filled FVG acts as S/R.
Entry Signals
Price pulls back into an unfilled FVG in the direction of the trend, Entry at the premium/discount edge of the FVG (or 50% CE level), FVG in confluence with an order block, HTF FVG with LTF confirmation entry
Exit Signals
Stop beyond the FVG boundary, Target the next liquidity pool or OB, Partial fill: if price fills only 50%, it may continue from CE
Best Timeframes
FVGs appear on all timeframes; 1H/4H FVGs are most tradable, 15M for entries
Pro Tips
The most powerful FVGs are those aligned with the prevailing trend on a higher timeframe. FVGs against the trend are more likely to be fully filled and invalidated.
More Topics in This Category
Order Blocks
An order block is the last opposing candle before a strong institutional move — the final bearish candle before a bullish impulse (bullish OB) or the final bullish candle before a bearish impulse (bearish OB). Order blocks represent zones where institutions placed large orders, and price tends to return to these zones for continuation.
Kill Zones & Session Timing
Kill zones are specific time windows during the trading day when institutional activity peaks and the most significant moves occur. ICT identifies four main kill zones: Asian session (20:00–00:00 ET), London Open (02:00–05:00 ET), New York Open (07:00–10:00 ET), and London Close (10:00–12:00 ET). Trading only during kill zones improves probability.
Change of Character (ChoCH)
A Change of Character is the first break of structure AGAINST the prevailing trend. In an uptrend, ChoCH is the first lower low. In a downtrend, ChoCH is the first higher high. ChoCH signals a potential trend reversal and is one of the most important SMC concepts for identifying turning points.
Institutional Candles
Institutional candles (also called displacement candles or impulse candles) are large-bodied candles with little to no wicks that represent strong institutional activity. They break through structure and create FVGs. The characteristics of these candles — body size, wick ratio, volume — reveal where institutions are committing capital.