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Fair Value Gaps (FVG) - Price Imbalances

Understanding and trading price inefficiencies.

What is a Fair Value Gap?​

A Fair Value Gap is a price zone where no trading occurred - a "gap" in the order book. It represents inefficient pricing that the market tends to correct.

Why FVGs Form​

During strong, impulsive moves:

  • Price jumps so quickly that buyers and sellers can't match orders
  • A gap appears between candles where no trades executed
  • This creates an "imbalance" the market often wants to fill

Anatomy of an FVG​

Bullish Fair Value Gap​

Formed during an upward move:

     Price
       ↑
       │    ████  Candle 3 (high)
       │    ████
       │         ← GAP ZONE (FVG)
       │ ████    Candle 1 (low)
       │ ████
       └──────────→ Time

The FVG is the space between:

  • Candle 1's high
  • Candle 3's low

Bearish Fair Value Gap​

Formed during a downward move:

     Price
       ↑
       │ ████    Candle 1 (high)
       │ ████
       │         ← GAP ZONE (FVG)
       │    ████  Candle 3 (low)
       │    ████
       └──────────→ Time

The FVG is the space between:

  • Candle 1's low
  • Candle 3's high

FVG Behavior​

Gap Fill Tendency​

Markets have a tendency to fill FVGs:

  • Price often retraces to "fill" the gap
  • This can happen quickly or over extended periods
  • Not all gaps fill - some remain open

After the Fill​

Once filled, the FVG zone can act as:

  • Support (for bullish FVG)
  • Resistance (for bearish FVG)
  • A decision point for continuation or reversal

Reading FVGs in Alstrum​

In Volt Table​

The FVG badge indicates a fair value gap near current price.

In Stryk Charts​

FVGs appear as purple shaded rectangles:

  • Top line: Upper bound of the gap
  • Bottom line: Lower bound
  • Label: "FVG" with direction

FVG Data​

  • Direction: Bullish or bearish
  • Gap Size: Distance in price and percentage
  • Fill Status: Unfilled, partially filled, or filled
  • Age: How long since formation

Trading Fair Value Gaps​

Strategy 1: Gap Fill Entry​

Concept: Enter when price returns to fill the gap.

For Bullish FVG:

  1. Wait for price to retrace down into the gap
  2. Look for support/rejection within the gap
  3. Enter long with stop below the gap
  4. Target: Previous high or next resistance

For Bearish FVG:

  1. Wait for price to retrace up into the gap
  2. Look for resistance/rejection within the gap
  3. Enter short with stop above the gap
  4. Target: Previous low or next support

Strategy 2: Gap as Target​

Concept: Use unfilled FVGs as take-profit targets.

  • If you're long and there's an unfilled bearish FVG above, that's a potential target
  • If you're short and there's an unfilled bullish FVG below, that's a potential target

Strategy 3: Continuation Through​

Concept: When price fills and continues through, trade the continuation.

  • Gap fills completely
  • Price doesn't hold the zone
  • Continuation in original direction
  • Enter on break of gap boundary

FVG Quality Factors​

Higher Quality FVGs​

FactorWhy It Matters
Larger gap sizeMore significant imbalance
Lower timeframeFaster fill tendency
With trendHigher probability of reaction
Near order blockConfluence zone
Fresh/untestedFirst touch often strongest

Lower Quality FVGs​

  • Very small gaps (minimal imbalance)
  • Against the trend
  • Already partially filled
  • Old gaps that market has "forgotten"
  • In choppy/ranging markets

FVG + Order Block Confluence​

The strongest setups occur when FVG overlaps with order block:

     Price
       ↑
       │
       │ ████████████  ← Order Block
       │ ████████████     overlapping
       │     ════════  ← with FVG
       │
       └──────────→ Time

This confluence provides:

  • Multiple reasons for price to react
  • Stronger support/resistance
  • Higher probability entry zone

Important Notes​

Not All FVGs Fill​

  • Some gaps fill immediately
  • Some take days or weeks
  • Some never fill
  • Don't force trades waiting for fills

Partial Fills​

  • Price may only fill part of the gap
  • Watch for reactions at 50% fill
  • Partial fill + rejection = trade signal

Timeframe Matters​

TimeframeFill Tendency
5m-15mOften fill within hours
1h-4hMay fill within days
DailyCan take weeks
WeeklyMay never fill

Common Mistakes​

1. Trading Every FVG​

Fix: Focus on quality gaps with confluence.

2. Expecting Immediate Fills​

Fix: Be patient. Set alerts for when price approaches.

3. Ignoring Context​

Fix: Consider trend, market conditions, and news.

4. Wrong Stop Placement​

Fix: Stop beyond the entire gap, not at the edge.

Example Trade​

Setup: NVDA showing BUY (75% confidence) with FVG badge

Analysis:
- Bullish FVG at $420-$425 (unfilled)
- Price currently at $435, pulling back
- FVG overlaps with previous bullish OB
- Strong uptrend intact

Trade Plan:
- Entry: $423 (middle of FVG)
- Stop: $418 (below FVG)
- Target: $450 (previous high)
- Risk/Reward: 1:5

Practice​

  1. Mark FVGs on your charts
  2. Track fill rates - How often do they fill?
  3. Note reactions - Does price respect the zones?
  4. Combine with OBs - Find confluence setups

Next Steps​