What Is Fair Value Gap?
A Fair Value Gap (FVG) is a three-candle price pattern where the wicks of the first and third candles don't overlap, creating an unfilled price zone (the gap) where only one candle traded. This represents a price imbalance — the market moved so aggressively that it left behind a zone with no two-sided trading.
How Fair Value Gap Works
FVGs act as magnets for future price action because institutional traders view them as areas of inefficient pricing. The theory is that the market tends to return to these zones to "rebalance" — filling the gap with proper two-sided price discovery. Bullish FVGs (gaps left by a strong up move) tend to act as support when revisited; bearish FVGs act as resistance.
Why It Matters for Traders
FVGs are a core concept in Smart Money Concepts (SMC) and ICT methodology. In crypto, FVGs form frequently due to high volatility, and their fill rate is remarkably high. Traders use unfilled FVGs as entry zones — buying at a bullish FVG within an uptrend or selling at a bearish FVG within a downtrend — with the FVG boundary serving as the invalidation level for stop placement.
