™A fair value gap (FVG) is a three-candle pattern where the middle candle moves so fast that the wicks of the candles on either side of it do not overlap. The space between those two wicks is price that was skipped — the market moved through it with orders on one side only.
Traders watch these gaps because price often comes back to them. The idea is that a move that one-sided left the auction unfinished, and the market tends to return to trade the area it rushed through before continuing.
How to spot one
Filled, partly filled and inverse
- Filled — price has traded back through the whole gap. Most traders then stop treating it as a level.
- Partly filled — price tapped into the gap and left. Some traders watch the midpoint of the gap (often called consequent encroachment) as the key reaction point.
- Inverse FVG — a gap that price closes decisively through, which then acts from the other side. A bullish gap that fails can become resistance on the way back up. That is a different setup from the original one.
FVG vs order block
The two often appear together. An order block is the last opposing candle before an impulse; the fair value gap is the imbalance the impulse leaves behind it. When a gap sits right next to an order block, many traders treat the combined area as one zone. See the full comparison →
The mistakes that cost the most
- Marking every gap. On a 1-minute chart there are dozens a day. Only gaps from genuine displacement, ideally ones that broke structure, deserve attention.
- Ignoring the higher timeframe. A small bullish gap on the 5-minute chart inside a strong 4-hour downtrend is a place price may pass straight through.
- Keeping filled gaps on the chart. Once price has traded fully through, the gap has done its job. Old boxes clutter the chart and pull you into trades at levels the market has forgotten.
- No stop. The far side of the gap (or of the order block beneath it) tells you where the idea is wrong. Use it.
Seeing fair value gaps in LiveTradingAI
LTAI Chart draws fair value gaps automatically as part of its smart-money structure tools, alongside order blocks, liquidity sweeps and break-of-structure labels — free in the browser. On TradingView, the LTAI Price Action Concept indicator marks FVGs together with volumetric order blocks and BOS/CHoCH. Open LTAI Chart →