A fair value gap, or FVG, is a three-candle price pattern that forms when a strong, fast move leaves a visible gap between the high of the first candle and the low of the third (in a bullish move), or the low of the first candle and the high of the third (in a bearish move). That gap marks a zone where price moved too quickly for orders to fill at every level along the way, and the trading strategy built around it is straightforward: wait for price to pull back into that gap, then look for a continuation entry in the direction of the original move.

FVGs work as a precise, rules-based way to spot pullback zones, more specific than a general support or resistance area, since the boundaries come directly from three exact candle prices instead of a judgment call about where a zone starts and ends.

What a Fair Value Gap Is

Picture three candles in a row during a strong move. The middle candle is the one doing the damage, a long, fast candle with little wick, the kind that signals a burst of one-sided pressure. Look at where the first candle’s high sits and where the third candle’s low sits. In a genuine bullish FVG, the third candle’s low sits above the first candle’s high, leaving a gap between them that no candle in the sequence traded through.

That empty space is the fair value gap. Nothing filled orders at those prices in real time, which is why ICT-style traders call it an inefficiency rather than a normal pullback zone.

Why Fair Value Gaps Form

FVGs form for a specific reason: buying or selling pressure outweighs the opposing side so heavily, often around a news release, an earnings report, or a large institutional order, that price skips through a range of prices without the usual back and forth. A calmer market prints candles with overlapping wicks, each one trading through part of the range the last candle covered. An FVG is the opposite: a clean skip, evidence that one side of the market had no real resistance in that zone.

Bullish vs Bearish FVG

A bullish FVG forms during a strong upward move. Picture USD/JPY moving through three candles: the first has a high of 149.80, the second is a large bullish candle that pushes from 149.75 to 150.40, and the third opens near 150.35 and holds above 150.00, with a low of 150.05. Since the third candle’s low (150.05) sits above the first candle’s high (149.80), the zone between 149.80 and 150.05 is a bullish FVG. A pullback into that zone afterward is where an FVG trader would look for a long entry, expecting the same buying pressure to continue.

A bearish FVG is the mirror image: the first candle’s low sits above the third candle’s high, with the gap between them forming during a sharp decline. A pullback up into that zone is where a trader would look for a short.

Full Fill vs Partial Fill

Price doesn’t always trade all the way through an FVG before reversing. Many traders only need the gap to fill halfway, a level ICT-style material calls consequent encroachment, roughly the midpoint of the gap, before treating the zone as having done its job and reacting from there. Others wait for a full fill, price trading completely through the gap’s far edge, before considering the setup confirmed or invalidated.

Neither approach is objectively correct. A trader entering at the 50 percent mark gets a better average price but risks the setup continuing through the full gap and stopping them out. A trader waiting for a full fill gets more confirmation but a worse average entry. Picking one rule and testing it consistently matters more than which specific rule gets chosen.

Inverse Fair Value Gap (IFVG)

An inverse fair value gap is what happens when price fully trades through an FVG and closes beyond it rather than reversing from inside it. Once that happens, the same zone that once acted as a bullish continuation area can flip and start acting as resistance on a later retest, and vice versa for a bearish FVG that gets broken through to the upside.

The logic mirrors a breaker block in order block trading: a failed zone doesn’t just disappear, it often flips roles and becomes relevant from the opposite side.

FVG vs Liquidity Void

The two terms get used interchangeably more often than they should. A fair value gap is specifically a three-candle pattern with an exact, measurable gap between candle one and candle three. A liquidity void is a broader, less strictly defined term for any stretch of chart with little to no trading activity, often spanning several candles rather than a precise three-candle structure, and usually only visible on higher timeframes.

FVGs tend to be smaller, more frequent, and usable on lower timeframes. Liquidity voids tend to be larger, rarer, and more relevant to higher timeframe context. Treating them as the same thing leads to marking zones that don’t actually meet the FVG definition.

FVG Trading Strategy Step by Step

1. Set higher timeframe bias using market structure: uptrend, downtrend, or range.

2. Scan for a fresh FVG that formed in the direction of that bias, ideally one that also aligns with a recent break of structure.

3. Mark the gap’s exact boundaries: the high of candle one and the low of candle three for a bullish FVG, or the reverse for a bearish FVG.

4. Decide in advance whether the entry trigger is the 50 percent midpoint or a full fill of the gap, and apply that rule consistently.

5. Look for a lower timeframe confirmation as price reaches the zone, such as a candle rejection or a smaller CHoCH, rather than entering blind.

6. Place the stop beyond the far edge of the gap, and set the target at the next structural level or unfilled FVG in the direction of the trade.

Combining FVGs with Order Blocks

FVGs rarely get traded in total isolation by experienced SMC traders. An FVG that sits inside or right next to an order block carries more weight than either signal alone, since it suggests the same institutional move that created the order block also left an unfilled gap behind it. Traders often use the FVG as the more precise entry trigger within a wider order block zone, tightening the stop compared to trading the full order block range on its own.

TypeDefinitionHow It’s Used
Bullish FVGGap between candle 1 high and candle 3 low during a rallyLong entry zone on a pullback
Bearish FVGGap between candle 1 low and candle 3 high during a declineShort entry zone on a pullback
Inverse FVG (IFVG)An FVG price has fully closed through, flipping its roleSupport/resistance from the opposite side after invalidation
Liquidity VoidBroader, less precise stretch of thin trading, often multi-candleHigher timeframe context rather than a precise entry trigger

Does Every FVG Get Filled?

Not every FVG gets filled, and it doesn’t need to for the concept to be useful. Some gaps get filled within the next few candles. Others stay open for weeks, and some never fill at all before the broader trend renders them irrelevant. The presence of an unfilled FVG is more useful as a directional clue, unfinished business above or below current price, than as a guarantee that price is obligated to return to it on any particular timetable.

Traders who backtest their own FVG rules on a specific pair and timeframe tend to get a far more useful answer to how often gaps fill than any general statistic, since fill behavior varies by instrument, volatility regime, and the specific rules used to define a valid FVG in the first place.

People’s Most Asked

What is a fair value gap in simple terms?

It’s a three-candle pattern that forms when a fast price move leaves a gap between the first and third candle, marking a zone where trading skipped over a range of prices, one many traders expect price to revisit later.

Do fair value gaps always get filled?

No. Some fill within a few candles, some stay open for weeks, and some never fill before the broader trend makes them irrelevant. An unfilled FVG is a directional clue more than a guaranteed target.

What is the difference between a fair value gap and an order block?

An order block is a single candle, the last opposing one before a sharp move. A fair value gap is a three-candle gap that often forms just after that same move begins. The two frequently appear together on the same impulsive leg.

What is an inverse fair value gap (IFVG)?

It’s an FVG that price has fully traded through and closed beyond rather than reversing from. Once that happens, the zone often flips and starts acting as resistance or support from the opposite side.

What timeframe works best for FVG trading?

Fifteen-minute and one-hour charts are common for spotting short-term FVGs to trade, while daily charts are often used to view larger gaps as context alongside longer-term support and resistance.

Should I enter at the edge of the FVG or wait for a 50 percent fill?

Both approaches are used. Entering at the 50 percent midpoint (consequent encroachment) gives a better average price but a higher chance of getting stopped out if price continues through the full gap. Waiting for a full fill gives more confirmation at the cost of a worse entry price. Consistency in whichever rule is chosen matters more than which one is picked.

Final Word

A fair value gap gives you an exact, measurable zone instead of a rough area to eyeball, which is the main reason it has become one of the more widely used SMC tools. The gap itself doesn’t predict anything on its own. What makes it useful is treating it as one input in a larger plan: confirmed by structure, sized with a real stop, and abandoned once it’s been filled and the setup it represented no longer applies.