Trading strategies
Fair value gap (FVG)
Definition
A three-candle pattern in which a strong middle candle leaves a gap between the wicks of candles 1 and 3.
Example
Suppose candle 1 has a high of $25.10, candle 2 surges from $25.00 to $26.20, and candle 3’s low is $25.60. The band from $25.10 to $25.60 is a bullish fair value gap, $0.50 wide, which price crossed only once, inside candle 2. Later, price may dip into it and bounce, fill it completely, or slice straight through it.
Hypothetical numbers, for illustration only.
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