Fair Value Gap (FVG)

Identification Rules

Learn to spot price gaps where no trading occurred. Clear criteria for valid FVGs.

Three consecutive candles where candle 3's body does not overlap candle 1's body
Bullish FVG: candle 1 low to candle 3 high leaves a gap; bearish FVG: candle 1 high to candle 3 low leaves a gap
The gap zone is the space between the wick of candle 1 and the wick of candle 3 (not the bodies)
Look for displacement (strong momentum candle) creating the gap—weak gaps in chop are less reliable

When price returns to fill the gap. Optimal entry timing and execution methods.

Enter on retracement into the FVG zone—typically 50% fill or when price taps the gap
Enter on a break and retest of the FVG after price has swept through it
Enter at the 50% midpoint of the FVG zone for optimal risk/reward
Wait for a confirming candle close inside or at the FVG before entering

Where to place stops beyond the gap. Risk management for FVG trades.

Bullish FVG: stop below the low of candle 1 (the candle that created the gap)
Bearish FVG: stop above the high of candle 1
Alternative: stop beyond the opposite side of the FVG zone
If the FVG forms at a liquidity pool (e.g. equal highs), expect a sweep before fill—place stop beyond the liquidity

Profit targets based on gap size and market structure. When to exit winners.

First target: previous swing high (bullish) or swing low (bearish)
Second target: next liquidity pool—equal highs/lows, order blocks, or opposing FVGs
Use 1:1.5 or 1:2 risk/reward minimum—FVGs often offer clean R:R
Consider partial profit at 1R and trail the rest to structure

Support/resistance levels and volume that strengthen FVG setups significantly.

When gaps don't hold and price pushes through. Market conditions that invalidate FVGs.

Trading every gap and poor entry timing. How to filter quality setups only.