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Technical Structure

Fair Value Gap (FVG)

A three-candle pattern representing a market imbalance where the middle candle moves rapidly, leaving a gap between the wicks of the preceding and succeeding candles.

Understanding Fair Value Gaps (FVG)

A Fair Value Gap (FVG) is an imbalance in price action that occurs when buying or selling pressure is so intense that price moves rapidly, leaving a visual gap on the chart.

Anatomy of an FVG

An FVG requires a three-candle sequence:

  • Bullish FVG: The high of Candle 1 does not overlap with the low of Candle 3. The empty space in between is the bullish FVG.
  • Bearish FVG: The low of Candle 1 does not overlap with the high of Candle 3. The empty space in between is the bearish FVG.

Trading Application

In the TradeGuardian Framework, we use FVGs as key areas of interest:

  1. Price Magnetism: Price frequently returns to fill or mitigate these gaps to resolve the structural market imbalance.
  2. Confluence: We search for entries when price sweeps session liquidity and enters a high-timeframe FVG.