A Fair Value Gap (FVG) is a price imbalance zone on a chart where the market moved very fast in one direction, leaving an area where buying and selling did not happen properly.
In simple words:
Fair Value Gap means a gap/imbalance created when price moves too quickly, and later price may come back to that zone before continuing its move.
How it forms in forex
A Fair Value Gap usually forms with three candles.
Bullish Fair Value Gap
A bullish FVG forms when price moves sharply upward.
It means buyers are very strong.
Example:
If EUR/USD moves strongly from 1.0800 to 1.0860, and during this move price leaves an imbalance between 1.0820 and 1.0840, that zone is called a bullish Fair Value Gap.
Later, if price comes back to 1.0820–1.0840, buyers may enter again and price may move upward.
Bearish Fair Value Gap
A bearish FVG forms when price moves sharply downward.
It means sellers are very strong.
Example:
If GBP/USD falls strongly from 1.2700 to 1.2640, and leaves an imbalance between 1.2660 and 1.2680, that zone is called a bearish Fair Value Gap.
Later, if price retraces back to 1.2660–1.2680, sellers may enter again and price may move downward.
Why traders use Fair Value Gap
Forex traders use Fair Value Gap to find:
- Possible buy zones
- Possible sell zones
- Retracement areas
- Continuation trade setups
- Better entry levels after a strong move
Simple trading meaning
- Bullish FVG = possible buying area when price returns to the gap
- Bearish FVG = possible selling area when price returns to the gap
Important point
Fair Value Gap should not be used alone. It works better with:
- Trend direction
- Support and resistance
- Market structure
- Liquidity sweep
- Candlestick confirmation
- Proper stop-loss and risk management
So, in short:
Fair Value Gap is an imbalance area created by a strong price move. Traders wait for price to return to this area and then look for a possible trade in the direction of the main move.
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