Fair value gap (FVG)
Also called imbalance, FVG. What it means, how it looks on a gold (XAUUSD) chart, and the mistake most traders make with it.
Fair value gap: A fair value gap is a three-candle pattern where the middle candle moves so fast that the wicks of the first and third candles don't overlap. The empty space between them is the gap, and price often comes back to fill part of it.
Fair value gap on a gold chart
On a 15-minute XAUUSD chart after strong US data, gold might rally from $4,100 to $4,135 in one candle. If the candle before topped at $4,110 and the candle after dipped only to $4,122, the gap is $4,110–$4,122. A later pullback into that zone is where many ICT traders look for a long.
How traders use it
Traders mark gaps that formed with displacement in the direction of the higher-timeframe bias, then wait for price to return. Entries are placed inside the gap (often at the 50% level, the consequent encroachment) with the stop beyond the candle that created it.
Common mistake
Treating every gap as a trade. Gold leaves dozens of small gaps a day; only the ones that broke structure or came after a liquidity sweep carry weight. Gaps against the higher-timeframe trend fail often.
Questions
What does fair value gap mean in trading?
A fair value gap is a three-candle pattern where the middle candle moves so fast that the wicks of the first and third candles don't overlap. The empty space between them is the gap, and price often comes back to fill part of it.
How is fair value gap used on gold (XAUUSD)?
Traders mark gaps that formed with displacement in the direction of the higher-timeframe bias, then wait for price to return. Entries are placed inside the gap (often at the 50% level, the consequent encroachment) with the stop beyond the candle that created it.
Do fair value gaps always get filled?
No. Strong trends can leave gaps unfilled for days. A gap is a likely area of reaction, not a guarantee, which is why a stop is always needed.
Educational content, not financial advice. Every concept here is a probability, not a guarantee.
Related terms
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