A Fair Value Gap (FVG) is one of the cleaner Smart Money Concepts to learn because it’s defined by an exact, mechanical pattern. It marks a spot where price moved so fast it left a “gap” — and the market has a strong tendency to come back and fill it.
What an FVG actually is
When price makes a violent, impulsive move, it can leave a range where almost no trading happened — the move was too fast. That range is a price inefficiency. Markets tend to revisit those inefficiencies later to “fill” them, which makes FVGs useful zones to watch.
How to spot an FVG
FVGs form across three consecutive candles, with a specific condition:
- Bullish FVG: the high of the first candle is lower than the low of the third candle. The space between those two levels is the gap. Price didn’t trade there during the move up — expect it to return.
- Bearish FVG: the low of the first candle is higher than the high of the third candle. Again, a range skipped during a fast move down.
It’s a precise, repeatable pattern — which is exactly why beginners like it.
The classic FVG setup
Here’s one of the most reliable SMC setups, combining multiple concepts:
- Wait for a CHoCH on your timeframe.
- Identify the FVG that formed during the CHoCH move.
- Wait for price to retrace back into that FVG.
- Enter in the direction of the CHoCH.
- Place your stop loss beyond the opposite side of the FVG.
- Target the next liquidity pool or structural level.
Notice how it stacks concepts: structure shift, then inefficiency, then entry. That layering is what makes it stronger than any single signal.
The honest caveat
Not every FVG gets filled. In strong trending markets, some gaps are never revisited. That’s exactly why the setup above waits for a CHoCH first — the FVG alone isn’t enough of a reason to enter. Confirmation matters.
This connects to a broader truth about SMC: no tool wins alone. Combine FVGs with structure, order blocks, and risk management for the best results.
Nothing here is financial advice — please read our disclaimer.
Want to see FVG setups traded in real time? Join our free community.