Fair Value Gap (FVG): What It Is, How It's Marked and Whether the Market Has to “Fill” It

A fair value gap (FVG) is a three-candle pattern in which the wicks of the first and third candles don't touch: in an up move, the low of the third candle is above the high of the first. The assumption is that little trading took place in that gap, so price will come back to it. There's no evidence the market “has to” fill it.

What it is

The concept was popularised by ICT and then by the whole Smart Money Concepts movement. There's a bullish FVG (a gap below price after an up move) and a bearish FVG (a gap above price after a down move). The middle of the gap is called consequent encroachment, and an FVG broken by a candle close becomes an inverse FVG. Two overlapping opposite FVGs form a balanced price range.

FVGs appear on candlestick charts very often, on every timeframe. That's why there are indicators that mark hundreds of these gaps automatically, and which one is “important” comes down to interpretation.

Watch the terminology: in a footprint, an “imbalance” means something else – a predominance of market orders on one side at adjacent prices. It's a measurement of orders, not the shape of candles.

How people use it

entries when price returns to the FVG
the FVG as a target (“price will fill the gap”)
consequent encroachment, i.e. 50% of the gap, as a reaction level
FVG indicators in TradingView that mark gaps automatically
combining FVGs with kill zones and “liquidity grabs”

What the research and evidence say

There's no independent research showing that FVGs marked from candles give an edge after costs. The tendency to revisit an area of fast movement is real and has long been described in auction theory as a test of low-volume areas, but its strength depends on context: the type of day, volume, whether the move was carried by aggression. An FVG doesn't measure any of that. On top of that, there are so many gaps that some will always get “filled”, which feeds the illusion that it works.

Weaknesses

a huge number of candidates on every timeframe
a “fill” is often near-certain only because the gap is close to price
it doesn't tell you whether there was real volume in the move
different definitions across authors and indicators

What order flow shows

What SMC calls a fair value gap shows up directly in the volume profile as a low-volume node (LVN) or single prints: prices the market moved through quickly, with almost no trading. The difference is that the profile shows how many contracts actually changed hands at each price, and the footprint shows whether the fast move was carried by one side's market orders. When price returns to such an area, order flow answers the question the FVG skips: does the market accept it (trading builds) or reject it?

Indicators vs order flow

Every indicator and every pattern in this section is built from the same data: a candle's open, high, low, close and sometimes volume. They're derivatives of price, showing the effect rather than the cause. Order flow looks at what price is made of: who was buying and selling aggressively (delta), where limit orders were waiting (the order book) and at which prices the market accepted trade (the volume profile).

On CME futures this data is real and comes from one central market. Spot forex doesn't have it: platforms show tick volume, the number of price changes at a single provider.

To be fair: order flow isn't the Holy Grail. It takes learning, it can be noisy, big players hide some of their orders, and an edge only comes from a process and risk control. But it gives you information that simply isn't on a candlestick chart.

How to use it sensibly

compare FVGs with low-volume areas and single prints in the profile
check in the footprint whether the move that left the gap was carried by aggression
count every FVG, not just the ones that worked
don't treat a “fill” as something the market owes you

Glossary: Single prints
Glossary: HVN and LVN
Glossary: Imbalance
Glossary: Price gap
Glossary: Volume profile
Atlas of biases: Cherry-picking
Atlas of biases: The Texas sharpshooter fallacy
Atlas of biases: Illusory correlation
Order flow: Volume profile: how to read the POC, value area, HVNs and LVNs
Order flow: Auction market theory: how the market searches for a price both sides will accept
Also under the microscope: Fibonacci retracements
Also under the microscope: Trend lines
Also under the microscope: Support and resistance

Frequently asked questions

What is a fair value gap?

A three-candle pattern in which the wicks of the first and third candles don't touch. It marks an area price moved through quickly, with little trading.

What's another name for a fair value gap?

It's often just called an imbalance gap or simply a gap left by a fast move. In auction theory a similar area is called a low-volume area or single prints.

Does price always fill an FVG?

No. It often comes back because the gap is close to price, but many FVGs remain unfilled, especially on trend days.

How is an FVG different from a price gap?

A classic price gap is the absence of trading between the close and the open. An FVG is a gap between candle wicks during continuous trading, so there was trading in that area – just not much.

What's the best FVG indicator?

The indicators differ only in how they draw the same candle rule. The volume profile gives you more, because it shows the actual volume in the gap.

Educational content, not investment advice. No signals, entries, stops or position sizes.