Fair value gap (FVG): how to spot one, and what it does not prove
By Karel Moreau, editor of tradingmentorreviews ·
A fair value gap (FVG) is a three-candle pattern where price moved so fast that the first candle's wick and the third candle's wick do not overlap. The empty space between them is the gap. ICT and smart-money traders expect price to come back into that gap and treat it as a place to enter. The pattern is easy to see; the hard part is knowing which gaps matter, which is where most of the method's discretion lives.
How to identify a fair value gap
- Find a strong candle (candle 2) — a large body moving decisively in one direction.
- Look at the candle before it (candle 1) and the candle after it (candle 3).
- Bullish FVG: candle 1's high is below candle 3's low. The gap is the range between them.
- Bearish FVG: candle 1's low is above candle 3's high. Same idea, inverted.
A worked example
| Candle | High | Low | Note |
|---|---|---|---|
| 1 | 100.00 | 99.20 | Ordinary candle |
| 2 | 102.40 | 99.90 | Displacement — the fast move |
| 3 | 102.90 | 101.10 | Low stays above candle 1's high |
Candle 1's high is 100.00 and candle 3's low is 101.10, so the bullish fair value gap spans 100.00 to 101.10. The midpoint, 100.55, is what ICT calls "consequent encroachment" — many traders wait for price to reach it rather than the edge of the gap.
How traders use FVGs
- As an entry zone: wait for price to retrace into a bullish gap, enter long, stop below the gap or the swing low.
- As a target: an unfilled gap above price is treated as a magnet.
- Inverse FVG (IFVG): when price closes through a gap instead of respecting it, the gap is flipped and used from the other side. Several Whop mentorships sell IFVG-based models specifically.
- With context: ICT teaches that a gap only matters after a liquidity sweep and a break of structure, inside a kill-zone time window.
The problem nobody selling FVGs mentions
On a one-minute chart, fair value gaps appear constantly. Most are filled, many are not, and "price came back to the gap" is true of so many gaps that it proves little. The pattern only becomes a strategy when you add rules that decide in advance which gap you will trade, where the stop goes and where you take profit — and then measure that rule over hundreds of trades. That is the test to put to any mentor teaching FVGs: show me the rule, and show me the record of the rule.
Remember that a setup's value is its expectancy, not its hit rate. A gap entry that works 40% of the time at 3R is far better than one that works 60% of the time at 0.5R. Our risk-reward guide has the break-even table.
Mentorships that teach FVG-based models
Dodgy's Dungeon — plus the wider set of 7 ICT and SMC communities in our ICT guide.
Frequently asked questions
What is a fair value gap?
A three-candle imbalance where the first and third candles' wicks do not overlap, leaving a price range that was traded through very quickly.
Do fair value gaps always get filled?
No. Many are revisited, many are not, and on low timeframes they appear so often that "filled" is weak evidence of anything. Use them only with fixed rules.
What is an inverse fair value gap?
A gap that price has closed through. Traders then treat it as support or resistance from the opposite side.
What is consequent encroachment?
ICT's term for the 50% midpoint of a fair value gap, used as a refined entry level.
Is FVG the same as an imbalance?
Yes — fair value gap, imbalance and inefficiency are used interchangeably in ICT and SMC material.
