Fair value gapFVGIntermediate
A three-candle pattern where the wicks of the first and third candle do not overlap, leaving a gap the middle candle moved through quickly.
What it means
A bullish FVG sits between the high of candle one and the low of candle three. The idea is that price moved too fast to trade fairly there, so it often comes back to fill part of the gap.
Traders use FVGs as entry zones, usually only in the direction of the bias and after a sweep or structure shift.
How to spot it
- Look at three candles in a row during a strong move.
- If candle one's high is below candle three's low, the space between is a bullish FVG (mirror it for bearish).
Common mistakes
- Trading every FVG on the chart. There are hundreds; context decides which matter.
- Expecting price to fill the whole gap every time.
How WickCheck tests it
Buy when price returns into a bullish fair value gap and price is above the 50 EMA. Sell when price returns into a bearish fair value gap and price is below the 50 EMA. Stop at 1.5x ATR. Target 2R.
Open these rules in WickCheck, change any word and run them in seconds. No code.
Full results on 5 markets: Fair value gap backtest.
What it looks like on a real chart
Picked automatically from the backtest on real data: the latest winner and the latest loser. The numbered circles are the steps of the rules, in order. Losers are part of every strategy.
Related terms
What a mechanical test can and cannot tell you about smart money concepts.
Education only, not financial advice. Definitions vary between teachers; these are ours, written for clarity.