Fair Value Gaps (FVG)
A Fair Value Gap is a three-candle imbalance where price moved too fast to trade efficiently. Price often returns to fill it.
The three-candle pattern
A Fair Value Gap is a three-candle formation. In a bullish FVG, the low of candle 3 does not reach the high of candle 1 — leaving a gap between them that price never traded. In a bearish FVG, the high of candle 3 does not reach the low of candle 1.
That gap represents imbalance: price moved so quickly that buyers and sellers never met efficiently. Markets tend to be efficient over time, so price often returns to 'fill' the gap and restore balance.
FVG as confluence and entry
An FVG within or near an order block is powerful confluence — it shows the move was genuinely imbalanced and institutional. Price returning to an FVG often finds support or resistance there, making it a precision entry zone.
Not every FVG gets filled immediately; some act as magnets over many sessions. Use FVGs on lower timeframes for entries and on higher timeframes to understand where price is likely to return.
Imbalance vs efficiency
The deeper idea: markets alternate between imbalance (fast, impulsive moves that leave gaps) and efficiency (slow, corrective moves that fill gaps). Learning to see this rhythm lets you anticipate whether price will continue impulsively or correct to fill a gap first.
Filling the gap on ES
A news-driven rally on ES: candle 1 has a high of 4,510, and the rally is so fast that candle 3's low is 4,522 — the 4,510–4,522 zone was never traded.
- 1Mark the Fair Value Gap: 4,510 to 4,522. Price moved too fast to trade efficiently there.
- 2Note where it sits: inside or right beside the order block that started the rally — the strongest confluence.
- 3Days later, price corrects and drops into the gap. Buyers step in exactly at 4,512 and price turns back up.
- 4The gap acted as support — imbalance restored, and the rally continued from the same zone institutions originally filled at.
FVGs are precision zones: when one overlaps an order block, that overlap is your entry, not the whole block.
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