17. Fair Value Gap (FVG)

In our previous lesson, we explored Order Blocks—zones where institutions enter the market with high-volume trades, leaving behind clues we can use. But institutional trading doesn’t just stop at entry zones. There’s another concept that gives us a peek into their footsteps: the Fair Value Gap (FVG).

✨ What is a Fair Value Gap?

A Fair Value Gap, or FVG, is a price imbalance created when the market moves rapidly in one direction, leaving behind an unfilled gap between candlesticks. This gap indicates that price didn’t have enough time to facilitate fair buying and selling.

In technical terms, an FVG occurs when:

• A three-candle sequence shows a wide candle in the middle,
• The high (or low) of the first candle and the low (or high) of the third candle do not overlap the middle candle’s body,
• Creating a “void” or imbalance on the chart.

This gap is like unfinished business in the market—and smart money knows that price often returns to these gaps before continuing its move.

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🧠 Why FVGs Matter in Smart Money Trading

Fair Value Gaps are crucial because:

• 📉 They reveal areas of price imbalance where liquidity was skipped.
• 🔁 Price often retraces to these zones to find buyers or sellers before moving again.
• 🎯 They provide high-probability entry zones, especially when paired with other tools like Order Blocks.

Think of FVGs as the trail left behind by institutional players when they quickly move large volumes through the market.

🔍 How to Spot a Fair Value Gap

To identify an FVG, look for:

• A strong impulsive candle (up or down),
• A gap between the first candle’s high and the third candle’s low (in a bullish move),
• Or between the first candle’s low and the third candle’s high (in a bearish move).

Example:

Bullish FVG:

• Candle 1: small bearish or neutral candle
• Candle 2: large bullish candle
• Candle 3: small pullback but doesn’t fully fill the gap

The space between Candle 1’s high and Candle 3’s low is the FVG zone.

Bearish FVG:

• Candle 1: small bullish or neutral candle
• Candle 2: large bearish candle
• Candle 3: small pullback, not touching the gap

The space between Candle 1’s low and Candle 3’s high becomes the FVG.

📷 We’ve shared a visual version of this on our social pages and inside the mini-course.

🛠 How to Trade FVGs

Once price creates an FVG:

1. Wait for price to retrace into the gap zone.
2. Use confluences like previous Order Blocks, liquidity zones, or psychological levels.
3. Enter a trade in the direction of the initial move, placing your stop-loss just outside the gap.
4. Target continuation zones or market structure highs/lows.

🧠 Pro tip: The middle 50% of the FVG zone often acts as a precise entry point for institutions.

❌ Common Mistakes to Avoid

• Don’t assume every FVG must be filled—sometimes gaps remain untouched for days or weeks.
• Avoid using FVGs alone—combine with market structure, liquidity, and order blocks.
• Don’t enter just because price enters a gap—wait for confirmation.

🎓 Continue Your Smart Money Journey

Fair Value Gaps are one of the most underrated yet powerful tools in the smart money trader’s toolkit. If you’ve grasped the concept of Order Blocks, understanding FVGs will help you predict retracements and sniper entries with much higher precision.

🧘 Final Thoughts – Trade like a Buddha

FVGs help you see through the noise and identify where price might return before continuing. The more you recognize imbalance, the more balanced your trading mindset becomes.

As I always remind my students:
“The market doesn’t move randomly. It rebalances what was left behind.”

Keep learning. Keep growing. Trade with peace and precision.