What it is
A fair value gap, also called an imbalance, forms when price moves so fast that one candle leaves a hole between its neighbours. The idea, popular in ICT and smart money concepts, is that price often comes back to trade through that hole.
A bullish gap sits under price after a strong rise; a bearish gap sits above price after a strong fall. WickSpeak draws them as shaded boxes that run to the right until they are filled.
How it is calculated
1. Look at every set of three candles in a row. 2. If the first candle's high is below the third candle's low, the space between them is a bullish gap. 3. If the first candle's low is above the third candle's high, the space between is a bearish gap. 4. Ignore gaps smaller than the minimum size (0.1% of price by default). 5. A gap is filled when a later candle trades all the way through it: down to its bottom for a bullish gap, up to its top for a bearish one.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| min size % | 0.1 | 0.01 to 5 | The smallest gap shown, as a percentage of price. Raise it to show only the big imbalances. |
| when filled | hide | hide, keep or shade | Hide filled gaps, keep them, or show them faintly shaded. |
| most recent | 20 | 1 to 100 | How many of the latest gaps are drawn. |
How to read it
How to trade it
- 1
Find an open gap in the direction of the trend, for example a bullish FVG on gold 15 minute after a break of structure up.
- 2
Entry trigger: price returns into the gap and a candle closes back up out of it.
- 3
Stop: just below the bottom of the gap, or below the low of the candle that created it. On gold 15 minute that is often 4 to 8 points.
- 4
Target: the recent high, or 2 to 3 times the stop.
- 5
Skip gaps that go against the higher timeframe trend.
A long from a bullish gap is proved wrong if a candle closes below the bottom of the gap.
WickSpeak draws open gaps as boxes on the chart and writes a plain-English reading: where the nearest gap is, how to trade a return to it and what would prove it wrong. The 146 pattern scanner also includes fair value gaps.
Best markets and timeframes
Gaps appear on every timeframe. On gold, US30 and NAS100 the 5 minute to 1 hour charts give useful ones, especially around the London and New York opens.
Common mistakes
- Treating every gap as a trade; many fill and keep going.
- Ignoring the trend and buying bullish gaps in a downtrend.
- Setting the minimum size too low, so the chart fills with tiny gaps.
Works well with
Questions traders ask
What is a fair value gap in trading?
It is a three candle pattern where the middle candle moves so fast that the first and third candles do not overlap. The space left between them is the gap.
Do fair value gaps always get filled?
No. Many are revisited, but some are never filled, especially in strong trends. Treat a gap as a place to watch, not a promise.
What is the difference between a fair value gap and an order block?
An order block is the last opposite candle before a strong move. A fair value gap is the empty space that move left behind. They often sit next to each other.
Which timeframe is best for FVGs?
Use the higher timeframe gap for direction and lower timeframe gaps for entries, for example a 1 hour gap with a 5 minute entry.