Fair value gap

A fair value gap (FVG) is a three-candle pattern in which the wicks of the first and third candles do not overlap, leaving a gap in the price range that traded only once.

How Fair value gap is calculated

Bullish gap: the high of candle 1 is below the low of candle 3. The gap is the range between those two prices. Bearish gap: the low of candle 1 is above the high of candle 3. Writing it this way makes it countable. The term comes from the ICT teaching style and has no standard definition outside it.

How it is read

ICT-style teaching says price tends to return to fill the gap. Whether it does is a testable claim, and it depends on how large a gap counts and how long you wait.

Common mistakes

• Counting only the gaps that were later filled.
• Leaving the gap size undefined, so tiny gaps count along with large ones.
• Treating a teacher's chart as a test. A chart shows examples chosen after the fact.

What Tickfloor tested

Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.

• The TJR / ICT sweep and fair value gap model (claim test)

Lessons that cover it

• Fair value gaps and order blocks, defined and tested

• Short definition in the glossary

Related concepts

• Liquidity sweep
• Support and resistance
• Overfitting
• Backtest
• All concepts

General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.

• See a full worked example (free, no account)
• Browse every course lesson by topic