What is fvg

Last updated: April 1, 2026

Quick Answer: FVG stands for Fair Value Gap, a technical analysis concept describing price imbalances where gaps between candlesticks indicate areas that traders expect markets to eventually fill.

Key Facts

Definition and Origin

FVG, or Fair Value Gap, is a technical analysis concept that identifies price inefficiencies in financial markets. The term gained prominence through the ICT (Inner Circle Trader) market structure framework, which emphasizes how markets move through imbalances and equilibrium seeking. When price gaps appear on charts, creating unfilled space, traders interpret these as temporary inefficiencies that the market will eventually correct.

How Fair Value Gaps Form

Fair Value Gaps form when price makes a sudden move—either up or down—that creates space between candlestick bodies or wicks. This happens during high volatility, news events, or strong directional moves where not all price levels are touched. The gap represents an imbalance between buyers and sellers that the market typically seeks to correct by returning price to fill that gap.

Trading Applications

Practical Analysis

To identify FVGs, traders examine candlestick charts looking for three consecutive candles where gaps exist. The concept assumes that markets operate on supply and demand principles and that unfilled price levels represent areas where traders' orders accumulate. This makes these zones psychologically and technically significant for future price movement.

Important Considerations

While FVG analysis is popular among technical traders, gaps don't always get filled, and market context remains crucial. Fundamental news, macroeconomic events, and broader market trends should always inform trading decisions. FVGs work best as part of a comprehensive trading strategy that includes risk management, position sizing, and multiple confirmatory indicators.

Related Questions

What causes fair value gaps to form in financial markets?

Fair value gaps form when price moves rapidly due to news, earnings announcements, or strong directional momentum, creating gaps that skip price levels. This imbalance between supply and demand represents temporary market inefficiency.

Do all fair value gaps eventually get filled?

Not all FVGs get filled; some gaps may never be revisited if market structure changes fundamentally or if newer gaps render old ones irrelevant. Historical context and ongoing market analysis are necessary.

How do professional traders use fair value gaps?

Professional traders use FVGs as zones for entries, exits, and stop placement within comprehensive trading strategies. They analyze gap size, location, and market context to assess probability and risk-reward ratios.

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Sources

  1. Investopedia - Gap Definition CC-BY-4.0
  2. CME Group - Futures Education Custom