The Fair Value Gap (FVG) is a price imbalance that leaves a "footprint" the market tends to fill. It is one of the core concepts of Smart Money Concept and ICT. Here is what it is, how to spot it, and how to trade it without overcomplicating things.
What a Fair Value Gap is
An FVG is a gap between three consecutive candles where price moved so fast it left an untraded zone. In a bullish FVG, the lower wick of the third candle does not overlap the upper wick of the first: a void remains. That void represents an imbalance between buyers and sellers.
How to identify it with three candles
- Bullish FVG: the low of candle 3 is above the high of candle 1. The gap between them is the FVG.
- Bearish FVG: the high of candle 3 is below the low of candle 1.
- The middle candle (candle 2) is the impulse that creates the imbalance.
Why price returns to the FVG
An impulsive move leaves unfilled orders in the gap zone. The market tends to return to fill (mitigate) that imbalance before continuing. That is why an unmitigated FVG acts as both a magnet and an entry zone: you wait for the pullback into the gap to enter in the direction of the original impulse.
How to trade an FVG
- Identify the bias with structure (BOS/CHoCH).
- Mark the FVG in the direction of the bias after an impulse.
- Wait for price to pull back into the gap zone.
- Look for confirmation (rejection, minor ChoCH) inside the FVG.
- Enter with a stop on the other side of the gap.
Strong confluence: an FVG that lines up with an Order Block or a session level after a liquidity sweep is among the highest-probability entries in SMC.
Detect FVGs automatically
Our EV Fair Value Gaps indicator marks them and tracks their mitigation — free on TradingView. Or automate the concept on MT5 with Master of Liquidity EA.
Related: SMC indicators for MT5.
Educational content. Does not guarantee profitability. Trading involves risk of capital loss.