- A fair value gap (FVG) is a price range between candle 1 and candle 3 that candle 2 moved through without trading on both sides.
- Bullish FVG: the high of candle 1 sits below the low of candle 3. Bearish FVG: the low of candle 1 sits above the high of candle 3.
- Traders watch whether price comes back to fill the gap. Some fills lead to a bounce, others do not.
- An inverse FVG is a gap that price closes through, which flips its role.
- FVGs are a pattern traders describe. We have not tested one as a standalone trading edge.
On this page
What is a fair value gap?
A fair value gap, or FVG, is a three-candle pattern. The middle candle moves so far and so fast that the first and third candles do not overlap. The space between them is the gap. In that range, trading was one-sided, so some traders expect price to return to it later.
The term comes from ICT-style trading, which also uses the word "imbalance" for the same thing. If you are asking "what is a fair value gap" in plain terms: it is a price range where buyers or sellers overwhelmed the other side, leaving a hole in the chart. The word "fair" is a label. It does not mean the market has a measurable fair price there.
You find an FVG by reading three candles in a row, on any time frame.
Bullish and bearish fair value gaps
Bullish fair value gap. Price rises sharply. The high of candle 1 is lower than the low of candle 3. The gap is the range between those two prices, and candle 2 is usually a large green candle. A bullish FVG often forms during a Break of Structure to the upside.
Bearish fair value gap. Price falls sharply. The low of candle 1 is higher than the high of candle 3. The gap is the range between them, with candle 2 a large red candle.
Quick rule: a gap exists when the wicks of candles 1 and 3 do not touch.
| Feature | Bullish FVG | Bearish FVG |
|---|---|---|
| Candle 2 | Large up candle | Large down candle |
| Condition | Candle 1 high < candle 3 low | Candle 1 low > candle 3 high |
| Gap zone | Candle 1 high to candle 3 low | Candle 3 high to candle 1 low |
| Traders watch for | Price returning down into the zone | Price returning up into the zone |
Fair value gap example
The numbers below are made up to show the shape. They are not a real trade.
Candle 1 on the 4h chart has a high of 60,000. Candle 2 opens near 60,100 and closes at 61,400 after a high of 61,500. Candle 3 has a low of 60,800. Because 60,800 is above 60,000, a bullish fair value gap exists between 60,000 and 60,800. It is 800 points wide, about 1.3% of price.
If price later falls back to 60,800 or lower, it is "filling" the gap. Some traders look for a bounce from the top of the zone. Others use the middle of the gap, at 60,400. If price closes below 60,000, the gap has failed.
The annotated diagram in the live example section below uses these same numbers.
How traders use a fair value gap
Most uses fall into three groups.
- As an entry zone. A trader waits for price to retrace into the gap in the direction of the larger trend, then looks for a reason to enter, with a stop on the far side of the gap.
- As a target. An unfilled gap above or below the market can be a place price might travel to.
- As a filter. A gap that forms with a Break of Structure is read as stronger than one in the middle of a range.
None of these is a rule. A gap can be ignored by price, filled and then run through, or filled in a single wick. Pair it with structure and a stop-loss, and size the trade with the position size calculator.
Inverse fair value gap (IFVG)
An inverse fair value gap, often written IFVG, is a fair value gap that price closes through, so the zone flips its role. A bullish FVG that price closes below can turn into a bearish zone that acts as resistance. A bearish FVG that price closes above can turn into support.
The logic matches old support becoming new resistance. The gap showed one side in control. When the other side takes over and closes through the zone, traders read it as a change in control and watch the same zone from the opposite side.
A common rule for IFVG trading: the close must be beyond the gap, not just a wick through it. Price then returns to the zone, and traders look for it to reject. Many pair this with a Change of Character. See our Change of Character guide.
This is a short summary. If there is demand, a full inverse fair value gap guide will follow.
Which time frame is best for fair value gaps?
There is no best time frame. Higher frames, such as the 4h and 1d chart, make larger gaps that matter more relative to trading costs. Lower frames make many small gaps, and most of them do not matter. A common approach is to find gaps on the 4h or 1d chart and use a lower chart to time the entry.
Our market analysis covers the 1h, 4h and 1d charts of Binance USDT pairs, so those are the frames we use in examples.
Are fair value gaps real?
The gap is real in the sense that it is visible on the chart and you can measure it. What is less clear is whether price returns to gaps more often than chance. Many gaps never get filled, and many are filled and ignored.
We have not tested fair value gaps as a trading strategy, and we do not claim that they work. Our research on crypto trading strategies shows how often plausible ideas fail once costs and out-of-sample data are applied. Treat FVGs as context for where traders are looking, not as a prediction.
See fair value gaps on a real chart
Fair value gaps are not shown on our live charts yet. The diagram below uses the numbers from the example above. Breaks of structure are live on every coin page.
Common mistakes
- Treating every gap as a trade. Most gaps are small and meaningless on low time frames.
- Ignoring the larger trend. A bullish gap inside a falling market gets less weight from most traders.
- Entering with no stop-loss. If price closes through the gap, the idea is wrong. Decide that before entry.
- Calling a wick through the zone an inverse FVG. Most definitions need a candle close beyond the zone.
- Assuming a gap must fill, or that it must hold when filled.
Related guides
Size the trade from your stop distance.Position Size CalculatorFAQ
What is a fair value gap?
A fair value gap is a three-candle pattern where the wicks of the first and third candles do not overlap, leaving a price range the middle candle moved through quickly. Traders read it as an imbalance between buyers and sellers and watch whether price returns to the range. It describes price action. It is not a forecast.
What is a bullish fair value gap?
A bullish fair value gap forms in a sharp rise. The high of candle 1 is below the low of candle 3, and the space between them is the gap. Traders watch for price to dip back into that zone. If price closes below the bottom of it instead, the gap has failed.
Do fair value gaps always get filled?
No. Some gaps are filled within a few candles, some much later, and some never. Filled gaps also do not always bounce. Any approach based on FVGs should assume the gap can be ignored and plan the stop-loss accordingly.
What is the difference between a fair value gap and an inverse fair value gap?
A fair value gap is the original three-candle imbalance. It becomes an inverse fair value gap when price closes through it, so a bullish gap turns into resistance or a bearish gap turns into support. Traders then watch the same zone from the other side.
Which time frame is best for fair value gaps?
No time frame is best. Higher frames like 4h and 1d produce fewer, larger gaps that fees weigh less on. Lower frames produce many small gaps. Many traders find gaps on a higher chart and refine entries on a lower one.
Are fair value gaps real?
They are real as a visible, measurable pattern. Whether trading them gives an edge is unproven, and we have not tested it. Treat FVGs as one piece of context next to market structure, not a signal on their own.
For education only. Not financial advice. Examples use made-up numbers unless marked live.