.png)
In price action trading, one of the most important concepts used by professional traders is the Fair Value Gap (FVG). This concept highlights moments when the market moves so quickly in one direction that price leaves behind imbalances, creating opportunities for future trades. By learning to identify FVGs, traders can gain an edge in predicting where price is likely to return.
What is a Fair Value Gap?
A Fair Value Gap occurs when there is a large, rapid movement in price that leaves a gap between candlesticks. This usually happens when there is heavy buying or selling pressure, and the market doesn’t have enough time to fill all the orders in that zone. The result is an “imbalance” that price often revisits later to correct.
For example: if a bullish candle is followed immediately by another strong bullish candle, there may be a space between the wicks of those candles and the one before them. This space is the Fair Value Gap.
Why Fair Value Gaps Are Important
- Price Often Returns – The market usually comes back to test or “fill” the FVG, making it a valuable signal for future entries.
- Identify Market Imbalance – FVGs highlight areas where demand and supply were not balanced.
- High-Probability Zones – Many traders use them to mark potential entry and exit zones with better accuracy.
- Helps Confirm Market Structure – FVGs work well alongside support, resistance, and breaker blocks to confirm directional bias.
How to Trade Using FVGs
- Mark the Gap: Identify the imbalance between candles and draw a zone on your chart.
- Wait for Price to Return: Instead of chasing price, wait for it to come back into the gap.
- Look for Confirmation: Use candlestick patterns, order blocks, or indicators to confirm entry.
- Manage Risk: Always set stop-loss levels just beyond the zone to protect against false signals.
Conclusion
Fair Value Gaps are a powerful tool in price action trading. They reveal areas of imbalance, provide insight into where price is likely to return, and help traders plan entries with greater confidence. When combined with other strategies like breaker blocks, liquidity zones, or order blocks, FVGs become a strong addition to any trader’s toolkit.