FVGs are zones where smart money creates inefficiency. Price always returns to fill them—predictable and profitable.
A Fair Value Gap is a gap between candle 1 and candle 3 that candle 2 does not close. It forms when one candle is large and the next candle does not give up much ground before reversing.
Example: Candle 1 closes at 1.1050. Candle 2 opens at 1.1020 (gap down) but closes at 1.1040 (barely). The gap from 1.1050 to 1.1020 is unfilled. This is the FVG.
This gap forms because of aggressive selling (candle 2 open) but then buying interest resumed (candle 2 close). The market is saying: "We wanted lower but buyers stepped in."
Market abhors inefficiency. Price WILL return to fill this gap. So professional traders mark FVGs and wait for the pullback to fill them.
Why does price return to FVGs? Because if it does not, traders who planned to exit at 1.1050 did not get their exit. They will buy on weakness later to exit at that level. Institutional demand at the gap pulls price back.
The setup: Identify an FVG from the last 1-3 hours of price action.
Wait: Price must move away from the gap (typically rallies after a bullish FVG, or declines after a bearish FVG).
Entry: When price pulls back to the gap zone, enter into the gap (long for bullish FVG, short for bearish FVG).
Stop: Place stop just beyond the opposite side of the gap.
Target: Take profit at the recent swing high or use the next FVG as a target.
This setup has a 65-75% win rate because price almost always fills the gap. The real risk is if price BREAKS through the gap (institutional shift in direction), but that is only 25-35% of the time.
A Fair Value Gap (FVG) is a price gap left behind during fast price moves. It is an imbalance that institutions use to set targets. When price moved 50 pips in one candle, it left a 20-pip vacuum. Institutions hunt these for entries.
After a fast move up: Draw from high of candle 1 to low of candle 3. If there is a gap between them with no price inside, that is an FVG up. On a move down: Same logic but inverted. FVGs are visible on 1H and 4H best.
No. FVG alone has 45% win rate. But FVG + BOS has 65%, and FVG + BOS + CHoCH has 75%+. Always combine FVG with structural elements (BOS, support/resistance, or liquidity zones) for edge.
Not always. About 70% of FVGs get filled within a few candles. The other 30% get swept over without a pullback. This is why confluence matters—not every FVG is tradeable.
FVG is a gap left in a fast move that gets filled. Pullback is a natural retracement of the move. FVGs are more aggressive and institutional. Pullbacks are where retail traders exit. Trade the FVG for institutional fills.