What it looks like
Three candles in a row. Bullish: the middle candle is a strong up candle, and the low of the third candle is above the high of the first, leaving a gap between them. Bearish: the middle candle is a strong down candle, and the high of the third candle is below the low of the first. The gap is the zone between those two wicks.
What it means
Price moved so fast that one side had no chance to trade in that zone, which is why it is also called an imbalance. Markets often come back to fill part of a gap like that before carrying on in the direction of the strong candle.
Bullish and bearish versions
How to trade it
- 1
Mark the gap: the space between the first candle's wick and the third candle's wick.
- 2
Do not chase the strong candle. Wait for price to drift back into the gap.
- 3
Bullish: buy inside the gap with a stop below its far (lower) side. Bearish: sell inside the gap with a stop above its far (upper) side.
- 4
Target one to two times the stop distance, or the high (bullish) or low (bearish) the strong move made.
- 5
Example: on the gold 15 minute chart a strong up candle leaves an 8 point bullish FVG. Price drifts back into it, you buy in the middle of the gap with a stop just under it, about 5 points away, and aim for 5 to 10 points.
Bullish: a close below the gap. Bearish: a close above the gap.
Where it works best
In the direction of the trend, after a strong move that broke a swing high or low, on 5 minute to 1 hour charts.
WickSpeak finds the fair value gap automatically on any chart and names it on the candles that made it. It writes what it is, how to trade it and what proves it wrong right on the chart. Playbook can use it, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, and backtest the play on past candles with your costs.
Common mistakes
- Chasing the strong candle instead of waiting for price to return to the gap.
- Trading every small gap, including ones against a clear trend.
- Putting the stop at the near side of the gap instead of beyond the far side.
Related patterns
Questions traders ask
What is a fair value gap in trading?
It is a three candle gap left by a fast move, where the first and third candles' wicks do not overlap. It marks a zone where price moved too fast to trade both ways.
Do fair value gaps always get filled?
No. Markets often come back to fill part of a gap, but not always, and some gaps are left behind. That is why the trade waits for price to return rather than assuming it will.
Where do you place the stop on an FVG trade?
Beyond the far side of the gap: below it for a bullish FVG, above it for a bearish one. A close past that side proves the trade wrong.
What is the difference between an FVG and an order block?
An FVG is the gap left by a fast move. An order block is the last opposite candle before that move. They often sit next to each other and traders use them together.