Fair Value Gap — The Void Price Must Come Back to Fill

This chapter I will teach you a concept that is subtle but powerful — the Fair Value Gap (FVG), sometimes called an imbalance.

What is an FVG — start from the idea of a "fair price"

In a "balanced" market — at every price level, both buyers and sellers meet. Trading happens evenly throughout.

But sometimes — price moves very fast and hard (e.g. during news, or when an institution enters a big order) so that it runs past some price levels with no balanced trading.

That stretch of price that was "skipped over with an imbalance" = a Fair Value Gap.

It is a "void" where one side (e.g. the buyers) dominated so completely that the sellers barely got to participate.

Why does price tend to come back and fill an FVG?

Because the market tends to "seek balance" — a price level that was skipped with an imbalance still has "undone" orders pending.

Price tends to come back and "fill the gap" (mitigate it) — to let the missing trading take place — before continuing in the original direction.

How to find an FVG — the 3-candle rule

An FVG is read from 3 consecutive candles:

Bullish FVG (forms while price surges up): - Look at candle 1 (its high) and candle 3 (its low) - If the low of candle 3 is higher than the high of candle 1 — the gap between them is the bullish FVG - It means candle 2 surged so hard it "jumped over" that stretch of price

Bearish FVG (forms while price surges down): - If the high of candle 3 is lower than the low of candle 1 — that gap is the bearish FVG

Simply put — look for "a big, strong middle candle" then check whether its left and right candles do not overlap — the non-overlapping slot is the FVG.

How to use an FVG — 2 main ways:

Way 1 — FVG as an entry When price pulls back to an FVG that matches the trend direction → it is an entry point. Often used together with an order block — frequently an FVG sits next to an OB → even more confluence.

Way 2 — FVG as a target If there is an FVG pending in the direction price is heading → price tends to run to "fill" that FVG → you can use it as a TP.

A quality FVG — notice 3 things: 1. It formed from a genuinely strong candle — the middle candle must be big, with momentum, not a tiny gap 2. It matches the structure direction — a bullish FVG in an uptrend = usable · a bullish FVG in a downtrend = be careful 3. It has not been filled yet — an FVG price has not come back to touch = still active

Beware — not every FVG gets filled

An FVG is a "tendency," not a hard rule — in a very strong trending market price may leave several FVGs behind without coming back to fill them for a while.

Use an FVG as confluence (a supporting factor) together with an OB + structure — not as a standalone signal.

The big picture — FVG + OB work as a pair:

When Smart Money enters a big order → price surges hard → it leaves behind both the order block (where it entered) and the FVG (the gap from the surge).

The zone where the OB and the FVG overlap = the most precise entry point in SMC — called the confluence zone.

> An FVG is a "debt" price left behind when it ran too fast — and the market tends to come back and pay the debt before continuing

Last chapter — we pull it all together by reading "who controls the game": BOS & CHoCH