ICT CONCEPTS · PRICE IMBALANCE
What is a Fair Value Gap (FVG) in Trading?
A fair value gap is a price inefficiency created when a displacement move is aggressive enough to skip over a range of prices entirely. Understanding what creates them and why price returns to fill them is the basis of the ICT entry model.
The definition: what an FVG actually is
A fair value gap (FVG) is defined by a specific three-candle structure: the high of candle 1 and the low of candle 3 do not overlap — leaving an untraded range between them. This gap sits in the body of the middle candle (candle 2), which is typically a large, directional candle representing the displacement.
For a bullish FVG: the low of candle 3 is above the high of candle 1. The gap is the range between the high of candle 1 and the low of candle 3 — an area price skipped over entirely on the way up. For a bearish FVG: the high of candle 3 is below the low of candle 1 — the gap sits above, an area price skipped on the way down.
The gap represents an inefficiency in the market. In auction theory, every price should be tested — if price moved through a range without two-sided trade, the market is considered imbalanced. ICT methodology treats this as a magnet: price has a tendency to return to FVG zones to fill the inefficiency.
FVG STRUCTURE
Candle 1The candle before the displacement. The HIGH of this candle is the lower boundary of a bullish FVG.
Candle 2The displacement candle — large, directional, often high-volume. The FVG sits within its body.
Candle 3The candle after displacement. The LOW of this candle is the upper boundary of a bullish FVG.
The gapThe range between C1 high and C3 low (bullish) or C1 low and C3 high (bearish). Untraded range.
Valid whileThe gap has not been fully filled — price has not retraced through the entire FVG range.
Why price returns to fill FVGs
The mechanical reason is liquidity. When price moves aggressively through a range without two-sided participation, there are unfilled limit orders at those prices — traders who missed the move and are waiting to get in, stop-loss orders that haven't been triggered, and institutional size that couldn't be fully absorbed at speed.
When price returns to the FVG zone, it is absorbing that remaining liquidity. In many cases, the presence of institutional buying or selling within the FVG is what causes price to respect the zone as support or resistance and reverse.
This is why FVGs are often used as entry zones rather than entry triggers. You don't enter when the FVG is created — you enter when price returns to the FVG after confirmation. The FVG is the target for the retracement; the entry confirmation is either a lower-timeframe order block within the FVG zone or a BOS on the lower timeframe confirming that price has rejected from within the gap.
The ICT FVG entry model
The complete ICT workflow for trading FVGs:
01Establish HTF bias
Identify the draw on liquidity on the 4H or Daily — where is price going? FVG entries must align with this narrative.
02Wait for displacement + BOS
A valid FVG requires the displacement candle to have also produced a break of structure in the displacement direction. Without BOS, the displacement is not confirmed as institutional.
03Mark the FVG zone
The gap between C1 high and C3 low (bullish). This is the zone price needs to return to for a valid entry.
04Wait for price to return
Do not enter on the FVG creation. Wait for price to retrace back into the gap. The retracement itself provides the entry context.
05Entry at 50% of the FVG
The equilibrium of the gap — the midpoint between C1 high and C3 low — is the standard entry reference. Stop below C1 high (for a bullish FVG). Target at the next draw on liquidity.
FVG vs imbalance — is there a difference?
In ICT content, “FVG” and “imbalance” are often used interchangeably. Both describe the three-candle structure where candles 1 and 3 don't overlap. Some ICT practitioners use “imbalance” for the broader concept of any untraded price range — including gaps, extensions, and single-candle moves — and reserve “FVG” specifically for the three-candle version.
In practice, both terms point traders to the same zones. Tradexis uses the strict three-candle FVG definition for auto-detection — the gap between candle 1 high and candle 3 low must be unambiguous and the displacement must be measurable.
FVG vs order block — when to use which
FVGZone-based entry — price fills an inefficiency. Best in trending markets with clean displacement. Larger entry zone, but also more likely to produce a clean fill.
Order BlockCandle-based entry — price returns to mitigate institutional orders. More precise reference (single candle), tighter stop potential. Best when the OB is within a larger FVG zone.
Both togetherThe highest-probability setup in ICT methodology: an OB that sits within an FVG zone. Price fills the FVG and mitigates the OB simultaneously — two structural references at the same level.
Tradexis records both OB and FVG variables on every trade. The Pre-Trade Mirror accounts for their co-occurrence — entries with both present have a distinct win-rate bucket in your fingerprint history.
How Tradexis auto-detects FVGs in the backtester
In the Drill Mode simulator, FVG detection runs on every trade. The system scans for unmitigated three-candle imbalances in the direction of your trade at the time of entry — where the gap between C1 high and C3 low (for bullish) or C1 low and C3 high (for bearish) is unambiguous and the displacement produced a measurable structural move.
This is stored as fvg_present: true/false in your trade fingerprint. The Pre-Trade Mirror then computes your win rate on FVG-present entries in the current context: same session, same direction, same volatility regime, same BOS status.
Tradexis Scan analyzes FVG-related patterns weekly across your journal — if your FVG win rate diverges significantly from your overall rate in specific sessions or at specific volatility levels, it surfaces the pattern so you can adjust your context filter rather than your strategy.
Frequently asked questions
What is a fair value gap (FVG) in trading?
An FVG is a three-candle imbalance where the high of candle 1 and the low of candle 3 don't overlap — leaving an untraded range. Price moved so aggressively that it skipped this range. In ICT methodology, price tends to return to FVG zones to fill the inefficiency before continuing in the displacement direction.
What is FVG in forex trading?
In forex, an FVG forms when a displacement candle moves so far that the surrounding candles' wicks don't reach each other. ICT-trained forex traders watch for price to return to this zone as a high-probability entry area. FVGs form on all timeframes across all forex pairs.
How do you trade a fair value gap in ICT methodology?
Identify the HTF draw on liquidity, wait for a displacement move with BOS confirmation that creates an FVG, then wait for price to return to the gap. Entry at 50% of the FVG (equilibrium). Stop below the FVG (bullish) or above it (bearish). The FVG is only valid while unfilled.
What is the difference between an FVG and an imbalance?
In ICT, FVG and imbalance are often used interchangeably — both describe the three-candle structure. Some content uses "imbalance" for any untraded range and "FVG" specifically for the three-candle version. The trading application is identical. Tradexis detects the strict three-candle FVG structure.
How does Tradexis detect fair value gaps automatically?
Tradexis's Drill Mode scans for unmitigated three-candle imbalances near your entry on every trade. It records fvg_present as a fingerprint variable. The Pre-Trade Mirror uses this in your win-rate calculation — showing your historical performance on FVG-present entries in the same context before your next FVG trade.
Related