What is Fair value gap (FVG)?
A fair value gap is commonly a three-candle pattern where the first and third candles' ranges do not overlap, leaving a gap treated as a revisit zone.
What does Fair value gap (FVG) mean in practice?
When a strong candle moves fast, the wicks of the candles on either side of it may not overlap, leaving a price range that traded only briefly. The pattern is read as an inefficiency that price may return to fill, partly or fully.
As with other SMC terms, the details are definitional. What gap size is meaningful, whether partial fills count, and how long a gap stays valid are settings, and a rule has to fix them before it can be evaluated honestly.
A worked example
Illustrative only: candle one's high is 100, candle three's low is 102, so 100 to 102 is a gap. A later candle trades back down to 101, filling half of it.
How to read or test it
Fix the minimum gap size, perhaps as a multiple of recent average range, and decide in advance whether a partial fill counts as filled. Then measure two things separately: how often gaps get revisited at all, and what happens on the revisit. The first number tells you whether the idea even applies, and many gaps are never revisited. Test it across different timeframes, since a gap on one can be noise on another.
How AKQX handles Fair value gap (FVG)
AKQX offers fair value gap detection among its SMC blocks, with parameters you set, so the idea can be backtested and then paper traded.
See ICT and SMC algo builder for the feature page.
A common mistake
Assuming every gap gets filled. Many are never revisited and the pattern has no inherent edge.
Educational only. This entry explains a term. It is not investment advice and does not recommend any trade, setting or strategy, and example numbers are illustrative, not results.
Related terms
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