A fair value gap (FVG) is a clean imbalance on the chart where price moved so fast that it didn’t trade fairly through a zone. You usually see it as a strong impulse candle that leaves little to no overlap with the candle before and after it. This “gap” is not a literal price gap like stocks sometimes show, but a liquidity imbalance where buyers or sellers dominated too aggressively.
The reason traders love FVGs is simple: markets often come back to rebalance inefficiencies. When price leaves a zone too quickly, it commonly revisits that area later to fill orders that couldn’t execute during the fast move. That revisit can create high-quality entries because you’re trading with structure, not chasing candles.
To spot an FVG step-by-step, first find a strong displacement move. Look for a big candle that breaks a recent high/low or shifts structure. Then check the three-candle sequence around it: in a bullish move, the low of the third candle may be above the high of the first candle, leaving an imbalance between those two levels. In a bearish move, the high of the third candle may be below the low of the first candle.
Once you mark the FVG zone, the next step is context. An FVG is strongest when it aligns with trend direction or forms after a liquidity sweep. For example, price might grab stops below a swing low, then explode upward, leaving a bullish FVG behind. That combination often signals smart money accumulation followed by displacement.
Now plan the entry. The common approach is to wait for price to return into the FVG zone and show confirmation. Some traders enter at the midpoint of the FVG (often called the “50% fill”), while others prefer the edge of the gap for tighter risk. The key is patience—your setup becomes powerful when you let price come to your level instead of forcing a trade.
For confirmation, watch lower timeframes when price taps the FVG. You want to see momentum slow down, rejection wicks, a shift in micro structure, or a clean break-and-retest inside the zone. If price slices through the FVG without any reaction, it’s a warning that the imbalance is not being respected this time.
Risk management is what turns FVGs into a real “weapon.” Place your stop beyond the zone where your idea is invalidated, not inside the noise. Targets should be logical liquidity areas like recent highs/lows, equal highs/equal lows, or major support/resistance levels. If the FVG formed after a big displacement, the first target is often the origin of the move’s next liquidity pool.
One mistake traders make is treating every FVG like a guaranteed reversal point. Not all gaps matter equally. The best FVGs are those created by strong displacement, with clear structure shift, and aligned with the higher-timeframe narrative. Random small imbalances inside choppy ranges get filled constantly and can trap you.
When used correctly, fair value gaps give you a clear zone, a clear invalidation point, and a clean reason to enter. You’re not guessing where price might turn—you’re waiting at an area where the market has unfinished business. That’s why FVGs remain one of the most practical tools for traders who want precision entries in fast-moving crypto markets.