--- title: "Fair Value Gap (FVG) in Trading, Explained - Get Funded Now" description: "FVG means fair value gap: a three-candle imbalance where the first and third wicks do not overlap. Bullish and bearish FVGs, retracements, and limits." url: "https://getfundednow.com/learn/fair-value-gap" language: "en" last_modified: "2026-09-22" publisher: "Get Funded Now (getfundednow.com)" translations: es: "https://getfundednow.com/es/learn/fair-value-gap" pt-BR: "https://getfundednow.com/pt-br/learn/fair-value-gap" fr: "https://getfundednow.com/fr/learn/fair-value-gap" it: "https://getfundednow.com/it/learn/fair-value-gap" de: "https://getfundednow.com/de/learn/fair-value-gap" disclosure: "All trading at Get Funded Now is simulated. 'Funded' means a simulated or virtual account; GFN is not a broker and does not hold client funds." --- Smart money concepts # The fair value gap, three candles at a time. FVG stands for fair value gap: a three-candle pattern in which the wicks of the first and third candles do not overlap, leaving a range the middle candle crossed with no two-sided trading. A bullish FVG runs from the first candle's high to the third's low. Traders watch whether price returns into it; the gap does not have to fill. [All trading lessons](https://getfundednow.com/learn) · [Read the trading rules →](https://getfundednow.com/rules) ## What a fair value gap is Take any three consecutive candles. If the third candle's low is above the first candle's high, the middle candle moved so fast that, within those three candles, there is a band of price that only traded in one direction. That band is a bullish fair value gap. The bearish version is the mirror: the third candle's high is below the first candle's low. The term comes from the ICT vocabulary, and traders also call it an imbalance or, in the older price-action language, an inefficiency. Some use the labels BISI (buy-side imbalance, sell-side inefficiency) for a bullish gap and SIBI for a bearish one. They all describe the same three-candle geometry. A bullish fair value gap between the first candle's high and the third candle's low, with its midpoint marked, and a later return into the gap. Illustrative schematic, not market data: no instrument, price or date is shown. ## How it differs from an ordinary price gap A classic gap is a jump between one candle's close and the next candle's open, with no trading in between - common in stocks over a weekend. A fair value gap needs no such jump. Every price inside it did trade, during the middle candle; the point is that it traded one way only. That is why FVGs appear constantly in markets that trade around the clock, where true gaps are rare. ## Retracement into an FVG, and consequent encroachment The common reading is that price often returns into a gap before continuing, and traders plan entries there. A return that touches the near edge is described as tagging the gap; one that reaches its midpoint is said to hit consequent encroachment, a term for the 50% level of the gap. Some traders enter only at the midpoint, others anywhere inside. There is no rule that a gap must be filled. Many are never revisited, some are filled completely and then broken, and a gap that price closes through is often re-read as an [inverse fair value gap](https://getfundednow.com/learn/inverse-fair-value-gap) with the opposite expectation attached. **Bullish and bearish FVGs side by side** | | Bullish FVG | Bearish FVG | | --- | --- | --- | | Forms in | An up-move | A down-move | | Top of the gap | Third candle's low | First candle's low | | Bottom of the gap | First candle's high | Third candle's high | | Usually watched as | Potential support on a return from above | Potential resistance on a return from below | | Considered failed when | Price closes below the bottom | Price closes above the top | ## How FVGs are used in a trading strategy On their own, FVGs are too common to be selective, so a fair value gap trading strategy almost always stacks them with something else: a higher-timeframe bias, a [liquidity sweep](https://getfundednow.com/learn/liquidity-in-trading) before the move that created the gap, a [break of structure](https://getfundednow.com/learn/break-of-structure) during it, or an [order block](https://getfundednow.com/learn/order-block) just beneath it. The gap then becomes the entry location inside a setup defined by the other conditions. Step by step ## How to identify it Mark gaps on closed candles only. A gap on a candle still forming can vanish before the close. 1. Look for a large-bodied candle that moved a long way relative to its neighbours. 2. Compare the candle before it with the candle after it. For a bullish gap, is the third candle's low above the first candle's high? 3. If so, shade the band between those two wicks. That is the fair value gap. 4. Mark its midpoint if you trade consequent encroachment. 5. Note the context: did the move that created it break structure, and did it start from a sweep of liquidity? 6. Set the invalidation: a close through the far side of the gap. Worked example ## The concept, walked through ### A bullish FVG, described An illustrative sequence in round numbers, described in words. It does not represent a real instrument or date. 1. 1. Candle one Trades between 96 and 100. Its high is 100. 2. 2. Candle two A strong up candle from 99 to 116. 3. 3. Candle three Trades between 108 and 118. Its low is 108, above candle one's high. 4. 4. The gap The fair value gap is 100 to 108, with a midpoint at 104. 5. 5. The retracement Price later falls back to 104. A trader using this model might look for a long entry here, with a stop below 100, the gap's far side. If price closes below 100, the gap has failed, and some traders would start treating 100 to 108 as resistance. A reaction at 104 would be one observation, not proof that fair value gaps work. Common mistakes ## Where traders go wrong ### Marking gaps on open candles Until the third candle closes, the gap is provisional. Many disappear before the close. ### Treating every gap as tradeable On a one-minute chart, gaps form every few minutes. Without filters, you are trading noise. ### Assuming gaps must fill They do not. A trader waiting for every gap to fill will wait for some forever and sit through others as they break. ### Confusing wick and body The gap is defined by wicks, the high and low of candles one and three. Drawing it from bodies produces a different, larger zone. Limitations ## What it cannot tell you No chart concept predicts price. These are the limits worth keeping in view. - A fair value gap is a description of how fast price moved. It carries no information about the future on its own. - Because the pattern is so common, some gaps will be followed by reactions purely by chance. That makes anecdotal success easy to find and meaningless as evidence. - The idea that price 'seeks fair value' by returning to the gap is a framing, not an established market mechanism. - Gaps on different timeframes overlap and contradict each other; which one matters is a choice the trader makes, not something the chart tells you. In an evaluation ## Using it on a simulated account FVG entries on low timeframes can be very short-term. On a GFN account the minimum hold is 2 minutes per trade, and the rule exists because very short holds tend to rely on execution conditions rather than analysis. Plan for trades that are held at least that long. Gaps also form around scheduled news, where the middle candle is the release itself. On a simulated funded account, profits from trades opened or closed in the window around high-impact releases may be removed, so a news-candle FVG is not an entry to rely on there. - [Can I scalp?](https://getfundednow.com/rules/scalping) - Trading rule - Short-term trading is allowed, with a 2 minutes minimum hold. - [Can I trade the news?](https://getfundednow.com/rules/news-trading) - Trading rule - Gaps created by high-impact releases fall inside the funded-stage news window. - [Does slippage excuse a breach?](https://getfundednow.com/rules/slippage-and-spreads) - Trading rule - Fast moves through a gap are where fills are worst. Questions ## Asked about this concept Fair value gap. It is the ICT and SMC name for a three-candle imbalance, sometimes also called an inefficiency. No. Some are revisited, some are filled completely and broken, and many are never returned to. Any trader who assumes a fill is certain will eventually be caught by one that does not happen. A bullish gap forms in an up-move, between the first candle's high and the third candle's low. A bearish gap forms in a down-move, between the first candle's low and the third candle's high. Keep learning ## Related lessons - [Smart money concepts (SMC and ICT)](https://getfundednow.com/learn/inverse-fair-value-gap) - Inverse Fair Value Gap (IFVG) Explained - A fair value gap that price closed through, after which traders read the same range with the opposite expectation. - [Smart money concepts (SMC and ICT)](https://getfundednow.com/learn/order-block) - Order Blocks in Trading, Explained - The last down-close candle before a strong rally, or the last up-close candle before a strong drop, marked as a zone of interest. - [Smart money concepts (SMC and ICT)](https://getfundednow.com/learn/break-of-structure) - Break of Structure (BOS) vs CHoCH - BOS is a break of a swing point in the trend's direction; CHoCH is the first break against it. The vocabulary of market structure. - [Smart money concepts (SMC and ICT)](https://getfundednow.com/learn/liquidity-in-trading) - Liquidity in Trading: Pools and Sweeps - Buy-side and sell-side liquidity, equal highs and lows, and what traders mean when they say price swept a level. - [Smart money concepts (SMC and ICT)](https://getfundednow.com/learn/smart-money-concepts) - Smart Money Concepts (SMC) Explained - What SMC and ICT mean, the core vocabulary in the order it is usually learned, and an honest account of what the framework can and cannot do. Sources ## What this page relied on 1. [Fair value gap](https://www.luxalgo.com/library/concept/fair-value-gap/) - LuxAlgo Library. Retrieved 22 September 2026. The three-candle definition: first candle's high to third candle's low for a bullish gap, and the mirror for a bearish one. 2. [Inversion FVG](https://www.luxalgo.com/library/concept/inversion-fvg/) - LuxAlgo Library. Retrieved 22 September 2026. Definition of an inversion gap as a fair value gap that price closes through, after which its expected role flips. 3. [Smart money concepts / ICT concepts](https://www.luxalgo.com/library/family/smc-ict/) - LuxAlgo Library. Retrieved 22 September 2026. The scope of the SMC/ICT vocabulary and how its concepts are grouped. Educational content only, not investment advice or a recommendation to trade. Chart concepts describe what price has done; none of them predicts what it will do, and trading any strategy can lose money. Get Funded Now accounts are simulated and trade virtual funds. Last reviewed 22 September 2026. Ready when you are ## Your capital stays yours. The risk is ours. One evaluation fee, no time limits and up to 90% of simulated profits. Pick an account size and your credentials arrive by email within minutes. [Start your challenge →](https://getfundednow.com/challenges) · [Read the rules](https://getfundednow.com/faq) No subscriptions or hidden fees Payouts every 14 days $400,000 max total allocation --- Source: https://getfundednow.com/learn/fair-value-gap Facts about Get Funded Now in one file: https://getfundednow.com/llms.txt