A Fair Value Gap is a price imbalance created when there’s a strong move up or down, and the market skips some price levels — meaning no trade occurred there.
---
🔍 How does it happen?
During high momentum (big buyer/seller activity), price moves so fast that it jumps over some levels. This creates a "gap" in the middle candle.
It usually forms in a 3-candle pattern:
Bullish Example (FVG Up)
Candle 1 (Bearish) Candle 2 (Big Bullish) ← Gaps up quickly Candle 3 (Small Bullish or Bearish)
FVG: Between high of Candle 1 and low of Candle 3
---
✅ Rules to Spot a Fair Value Gap
1. Look for 3 consecutive candles
2. Middle candle has a large body
3. Gap forms between:
Bearish FVG: Low of Candle 1 & High of Candle 3
Bullish FVG: High of Candle 1 & Low of Candle 3
---
📈 Why is it important?
Smart Money (banks, institutions) often return to fill these gaps before continuing the trend. So: