Fair Value Gaps (FVGs) are among the most overlooked yet powerful tools leveraged by professional and institutional traders. These gaps represent price inefficiencies that occur when a sudden imbalance between buy and sell orders causes a sharp move creating a void on the chart, typically between one candle’s high and the next candle’s low.
These gaps often act like magnets price tends to revisit them. When it does, it presents a high probability entry opportunity for savvy traders.
💥What Is a Fair Value Gap⁉️
A Fair Value Gap forms when price moves so aggressively that it doesn’t allow orders to fill evenly on both sides. It’s a sign of urgency in the market an imbalance. Typically, an FVG appears between:
The low of Candle 1
The high of Candle 3
(With Candle 2 being the impulsive push)
In bullish FVGs, price surges upward, leaving a gap below. In bearish FVGs, price plummets, leaving a gap above.
💥Why Should You Care?
Because Smart Money institutions, hedge funds, algorithms often revisit these gaps to enter or reload positions. This means:
You can anticipate high probability entries
You can set clean stop losses and targets
You can reduce emotional and impulsive trades
✨️ How to Trade Using FVG
Step 1: Identify the FVG
Spot a strong impulse candle (Candle 2) with minimal or no wick, nestled between two smaller candles.
Step 2: Wait for Price to Return
Let price return into the FVG zone. Patience is crucial never chase price.
Step 3: Look for Confirmation
Watch for candlestick confirmations within the gap such as a hammer, engulfing pattern, or a strong reversal signal.
Step 4: Define Entry and Exit
Entry: Mid point of the FVG zone
Stop Loss: Just beyond the opposite edge of the gap
Take Profit: At the next significant liquidity zone or Order Block
⚡️Real Example (BTC 1H Chart)
On April 3rd, BTC formed a bullish FVG between 65,200 and 65,800. After a strong breakout, price retraced 6 hours later, tapped the FVG midline, and surged +3.5%.
This is not a fluke FVGs consistently provide clean setups.
Boost Your Edge with Confluence
Combine FVG with these smart tools.
RSI Divergence to confirm potential reversals
Order Blocks near or inside FVG zones
TradingView Alerts to catch setups automatically
🚨 Final Thoughts
Mastering Fair Value Gaps isn’t just about spotting voids in price it’s about reading the hidden narrative of the market. If you align with how Smart Money moves, you’ll stop being prey and start hunting like a shark in a pool of minnows.
Don’t trade blindly. Learn the art of imbalance, and let the market come to you.
