Fair Value Gap (FVG) — what it is and how to use it in trading
Definition
A Fair Value Gap (FVG) is a price imbalance between the wicks of three consecutive candles, formed during a sharp impulsive move. For a bullish FVG the low of the third candle sits above the high of the first — leaving an untested price zone the market skipped over on the way up.
How it works in the builder
The gap appears when one candle moves so sharply that neither neighboring candle's wick overlaps it. In the Trading Way builder this is a boolean operand: fvg_bull/fvg_bear is 1 on the bar where such a gap forms, while price_in_fvg_bull/price_in_fvg_bear is 1 on the bar where price returns inside a previously formed zone (with a max_age parameter controlling how many bars the zone stays "active").
What it looks like on the chart
On the chart an FVG is drawn as a rectangle between the wick of the first and the wick of the third candle in the three-candle sequence. The zone stays visible until price "closes" it by trading all the way through the range.
Typical use
Smart Money traders treat a return into an FVG as a potential trend-following entry zone, based on the market's tendency to statistically "fill" such gaps before continuing. Typical builder condition: price_in_fvg_bull == 1 combined with bos_up == 1 on the preceding bars — a trend entry after a confirmed structure break.
Common pitfalls
Not every gap fills quickly — price can travel far in the opposite direction before returning, and on strong trending moves the zone may never fill at all. An FVG also doesn't set a direction on its own — it's a zone of interest, not a signal, and is almost always combined with a structure confirmation (BOS/CHoCH) or another filter.
This block is available in the strategy builder
137 no-code blocks — build an entry condition with this term and test it on history
Historical results do not guarantee future ones. The service is an informational and analytical tool, not an individual investment recommendation; trades are not executed.
Bullish FVG
Block variants
Bearish FVG
Price in Bullish FVG
Price in Bearish FVG