A Fair Value Gap (FVG) is a three-candle price pattern often taught in ICT-style trading:
1. Candle 1 moves in one direction.
2. Candle 2 makes a sharp impulse, leaving a clear "gap" between its body and the prior candle's wick.
3. Candle 3 continues the move, leaving an empty zone between Candle 1 and Candle 3 that was never tested by price.
This untested area is called the Fair Value Gap. The idea is that institutions supposedly left unfilled buy or sell orders in this zone. Because of that, price is expected to "revisit" the gap to complete those orders before continuing.
Why it appeals to new traders:
- •It looks simple and clean.
- •It feels like a rule: "Every imbalance must get filled."
- •It gives a visual target for entries and exits.
But the simplicity is misleading. Like many retail concepts, the theory sounds powerful — but reality is messier.
While FVGs may look convincing in hindsight, they break down under real trading conditions:
1. Not an institutional concept
- •Professional traders, quants, and institutions don't use FVGs.
- •They're absent from CME courses, textbooks, and industry research.
- •They were popularized online for retail audiences — not in real trading floors.
2. They appear everywhere
- •On low timeframes (like 15s or 1m charts), gaps show up constantly, many of which never get filled.
- •On higher timeframes, gaps are rarer — but fills may take days or weeks, if they happen at all.
- •Traders are left unsure: Which gap is supposed to matter?
3. Subjectivity & hindsight bias
- •Does a "half fill" count? Does wicking into the zone qualify?
- •In hindsight, traders highlight the gaps that worked and ignore those that failed.
- •This creates the illusion that FVGs are magnets, when in reality they're inconsistent.
4. Execution issues in live trading
- •In demo, an FVG fill looks clean — price taps the zone, reverses, and your entry is perfect.
- •In live trading, spreads, slippage, and partial fills mean execution rarely matches the textbook example.
- •This is why new traders often lose money even when they think they're following the rules.
5. No proven statistical edge
- •To date, there's no peer-reviewed study or public backtest proving FVGs produce long-term profitability.
- •Many fills overlap with normal retracements or liquidity grabs — things that happen naturally in markets, with or without an FVG.
Many beginners overestimate FVGs because of how they're taught online. Let's clear up a few myths:
"Institutions use FVGs."
False. Institutions base trades on liquidity, order flow, and risk models. FVGs are not part of institutional strategy.
"Every imbalance must be filled."
Not true. Markets often ignore gaps, overshoot them, or fill them partially. There is no universal "must."
"Marking FVGs gives precision."
Price doesn't move with pixel-perfect accuracy. A gap may get tapped, pierced halfway, or completely ignored. Tight stop-losses based on "exact" FVG levels often lead to repeated losses.
"FVGs are a secret institutional edge."
They are not a hidden professional tool. At best, they're a simplified way to label retracements. At worst, they encourage beginners to see patterns where none exist.
To make the concept clear, here are simplified examples you can later expand with charts:
Example 1: The Illusion of Certainty
- •Price formed an FVG and later returned to it.
- •Traders assumed the FVG "caused" the fill.
- •In reality, it was just a standard retracement into a moving average and prior demand zone.
- •Lesson: FVGs often overlap with existing, better-known structures.
Example 2: Contradictory Timeframes
- •A 1-minute chart showed a bearish FVG.
- •At the same time, the 15-minute trend was strongly bullish.
- •Traders who shorted based on the 1m FVG got trapped.
- •Lesson: Gaps conflict across timeframes, making them unreliable without higher context.
Example 3: The Partial Fill Trap
- •Price tapped halfway into the FVG and reversed sharply.
- •Traders waiting for a "perfect fill" missed the move.
- •Lesson: Markets don't respect textbook precision.
Example 4: Demo vs. Live Execution
- •In demo, an FVG entry looked flawless.
- •In live trading, spreads widened, the fill slipped, and the stop was hit.
- •Lesson: The theory might look good on paper, but execution risk changes the outcome.
Final takeaway for readers:
Fair Value Gaps are not fake, but they're not laws of the market either. They are a way of visualizing imbalances — nothing more. For beginners, they often create more confusion than clarity. Treat them as teaching tools or visual hints, not as a reliable system on their own.