Fair Value Gaps (FVG) — ICT Concept Explained

What is a Fair Value Gap?

A Fair Value Gap (FVG) occurs when price moves so quickly that a gap forms between three consecutive candles. Specifically: the high of the first candle and the low of the third candle do not overlap — leaving an open area.

Types of Fair Value Gaps

Bullish FVG

• Occurs during a strong upward movement
• The gap lies between the high of candle 1 and the low of candle 3
• Price often returns to fill this gap before continuing higher

Bearish FVG

• Occurs during a strong downward movement
• The gap lies between the low of candle 1 and the high of candle 3
• Price often returns to fill this gap before continuing lower

Trading with Fair Value Gaps

FVGs often provide excellent entry opportunities:

1. Wait for the pullback: Price frequently returns to the FVG
2. Use limit orders: Place your limit order at the edge of the FVG
3. Seek confirmation: Combine FVGs with order blocks for higher probability
4. Stop loss: Place your stop loss below/above the entire FVG