Introduction
The Space Between Efficiency and Intent
Every time Smart Money enters the market with real force, price moves aggressively, leaving behind a void.
That void is called a Fair Value Gap, or FVG, an area where price moved too quickly for balanced trading to occur.
In Smart Money terms, the FVG is the imbalance between buyers and sellers,
a visual clue that institutions drove price faster than the market could keep up.
Price almost always returns to these areas later,
to rebalance inefficiency and continue structure with precision.
What Is a Fair Value Gap (FVG)?
The Definition:
📊 A Fair Value Gap is an imbalance in price action between three consecutive candles,
where the middle candle moves so strongly that it leaves a “gap” between the first and third candles’ wicks.
💬 In simple terms:
An FVG shows where price skipped trading activity,
and where it’s likely to return to rebalance later.
This gap becomes a magnet for price, signaling unfinished business left by Smart Money.
Why FVGs Form
When institutions enter with large volume,
they create displacement, a strong move in one direction that clears liquidity and breaks structure.
That displacement candle often leaves behind inefficient pricing,
because one side of the market (buy or sell orders) dominated too heavily.
Price must later revisit the gap to fill unexecuted orders, creating balance between both sides.
💡 Think of FVGs as footprints of imbalance, where efficiency must eventually return.
How to Spot an FVG on the Chart
A Fair Value Gap appears in a three-candle sequence:
- Candle 1 → Creates a wick.
- Candle 2 → Strong impulsive move (displacement).
- Candle 3 → Fails to overlap the previous wick, leaving a gap in between.
📍 The zone between Candle 1’s wick and Candle 3’s wick = The Fair Value Gap (FVG).
💬 That space is where price traded inefficiently, and will often later rebalance.
How FVGs Work Within Structure
1️⃣ Liquidity Is Taken – price sweeps stops.
2️⃣ Displacement Candle Forms – creates the FVG.
3️⃣ Structure Shifts (CHoCH / BOS) – confirms Smart Money intent.
4️⃣ Price Retraces to the FVG – fills the inefficiency.
5️⃣ Continuation – move resumes in original direction.
💬 Every efficient leg of structure starts with an FVG being filled.
How to Mark an FVG on TradingView
1️⃣ Find a strong displacement candle.
2️⃣ Identify the gap between candle 1 and candle 3 wicks.
3️⃣ Draw a rectangle from top to bottom of the gap.
4️⃣ Label it: “Fair Value Gap (FVG)”.
5️⃣ Wait for price to retrace into the zone,
that’s your potential re-entry or continuation area.
💬 Pro Tip:
Combine FVGs with Order Blocks for high-probability confluence.
Often, the FVG forms inside or near an Order Block,
giving a refined entry area where imbalance meets intent.
The Do Nots
Common Mistakes Traders Make
❌ Marking every small gap as an FVG
→ Only large, displacement-based gaps count.
❌ Assuming all FVGs must fill
→ Sometimes price continues without full fill, look for context and confluence.
❌ Entering inside the gap without confirmation
→ Wait for displacement or CHoCH reaction after the fill.
💡 VWAP isn’t an entry line, it’s a bias and balance reference.
Final Thoughts
A Fair Value Gap isn’t just an empty space on the chart,
it’s a record of Smart Money’s speed and strength.
Where inefficiency exists, balance will follow.
And when price returns to fill that imbalance,
Smart Money is quietly reloading for the next expansion.
Learn to see these gaps not as noise,
but as invitations.