Fair Value Gaps (FVG): Trading Imbalances

A Fair Value Gap (FVG) is an imbalance in price that occurs when there's a heavy unidirectional move where buyers or sellers were absent for a portion of the move.

Anatomy of an FVG

An FVG is found between three consecutive candles. It is the gap between the wick of the first candle and the wick of the third candle, where the second candle is a large directional candle.

Why Price Returns to Gaps

The market seeks "fair value." When an imbalance occurs, price often revisits that level to "fill" or "rebalance" the orders. This often acts like a magnet for price.

Using FVGs for Entry

FVGs can be used as both entry points and targets. When price returns to an FVG that aligns with an Order Block, the probability of a successful trade increases significantly.

Conclusion

Mastering FVGs will change the way you see "fast" moves in the market. It's a cornerstone of the SMC strategy.