Fair Value Gap
In ICT/Smart Money Concepts terminology, a three-candle chart pattern in which the first and third candle ranges do not overlap. It is commonly interpreted as an imbalance. The pattern alone neither proves unfilled institutional orders nor guarantees a later return.
Example. In a bullish example, candle 1 has a high of 1.1000 and candle 3 a low of 1.1010. The marked zone is 1.1000–1.1010, or 10 EUR/USD pips. Candle 2 may have traded through that interval, so this is not necessarily a market opening gap.
Define a testable rule
Specify whether the candles must be closed, the minimum zone size, the timeframe and whether a “fill” means first touch, midpoint or full traversal. Set a time horizon and count zones that never fill within it.
Common mistake
A return to a marked zone is not itself a profitable trade. Entry timing, invalidation, execution costs and what happens after entry matter. Do not count only attractive examples found after the move.
Apply it
Record the rule before testing and evaluate it on unseen data. Report both successful and failed zones, with spread and slippage assumptions. The chart label is a hypothesis to test, not evidence of an edge.
FAQ
Does an FVG mean no transactions occurred in its zone?
No. The middle candle may span that range; the pattern does not define a complete absence of trading.
When is the three-candle structure known?
In a completed-candle version, only after candle three closes. Its eventual Low or High cannot be used earlier.
