What is a fair value gap
An FVG is a three-candle imbalance. When a strong, fast candle (a displacement) pushes price hard in one direction, it can leave a gap between the wick of the candle before it and the wick of the candle after it. That untraded space in the middle is the fair value gap.
It represents inefficiency. Price moved so quickly that not every buyer and seller got filled, and markets tend to revisit those areas to trade them fairly, which is why FVGs so often get filled before the move carries on.
Why price returns to fill it
Think of a displacement move as a rubber band stretching. The gap is the stretch. Large players who missed the initial move want a better price, and the market wants to rebalance the inefficiency, so price frequently pulls back into the FVG before continuing in the displacement direction.
That pullback is your opportunity. Instead of chasing the fast candle, you wait for price to come back into the gap and enter there, with a much tighter stop.
Bullish vs bearish FVG
A bullish FVG forms during a strong up move and sits below current price; it acts as a support zone that price can drop back into before rising again. A bearish FVG forms during a strong down move and sits above price, acting as a resistance zone for a pullback before the drop continues.
The direction of the displacement candle tells you which one you have. Trade bullish gaps for longs and bearish gaps for shorts, in line with the move that created them.
How to trade the gap
Mark the gap from the wick of the first candle to the wick of the third. The common entry is at the 50% midpoint of the gap, which balances a good fill with a decent chance of getting filled at all. More aggressive traders enter at the near edge; more patient ones wait for the far edge.
Place your stop just beyond the gap, because if price closes fully through it, the imbalance idea is invalid. Target the next structure level or liquidity pool for your take profit.
FVG plus confluence
An FVG on its own is useful; an FVG stacked with other signals is powerful. The best gaps line up with an order block, sit in the right premium or discount area, or form right after a liquidity sweep. When a gap overlaps an order block, that combination is often called a unicorn setup for a reason.
The more of these that align at the same price, the higher the quality of the entry. A lone gap in the middle of nowhere is far weaker than one at a level that already matters.
Mistakes and how to see it live
Not every gap fills, and not every gap should be traded. Ignore tiny, insignificant gaps and gaps that form against the higher-timeframe trend. Context first, gap second. A bullish FVG is only a long idea if the bias supports up.
Open the live XAUUSD chart and turn on the FVG tool to see the imbalance zones marked automatically, with filled gaps dropping off. Pair it with smart money concepts on gold for the full picture.
FAQ
Does every fair value gap get filled?
No. Many do, but not all, especially in a strong trend where price runs away. Trade gaps that align with the trend and with other confluence, and always use a stop.
Where exactly do I enter an FVG?
A common entry is the 50% midpoint of the gap. Aggressive traders use the near edge, patient traders the far edge. Stop just beyond the gap.
What timeframe is best for FVGs on gold?
They appear on every timeframe. Many traders map higher-timeframe gaps for context and use lower-timeframe gaps for entries. Nothing here is financial advice.
ⓘ See these ideas on real price: open the free XAUUSD live chart.