SMC Term — Zone
What is FVG?
Fair Value Gap
FVG — Fair Value Gap
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A Fair Value Gap (FVG), also called an imbalance, is a three-candle pattern where the second candle moves so strongly that there is a gap between the wicks of the first and third candles. This gap represents a price inefficiency — a zone where price moved too fast and is likely to return to fill the imbalance. FVGs act as high-probability entry zones in Smart Money Concepts trading.
How to Trade FVG
After identifying a bullish FVG (gap left during an upward impulse), wait for price to pull back into the gap zone. The FVG entry zone is between the wick of candle 1 and the wick of candle 3. Enter long when price enters the FVG with a bullish confirmation candle. Stop loss goes below the FVG. For bearish FVGs, reverse the logic. FVGs are most powerful when they align with Order Blocks or are created during a BOS impulse.
Real Example — XAUUSD
Example: On the H1 chart, price gaps up aggressively leaving an FVG between 3295.00 and 3305.00. Price is now at 3340.00. You wait for a pullback into the FVG zone (3295–3305) and look for a bullish entry candle. Stop loss below 3293.
Related SMC Terms
Frequently Asked Questions
What is a Fair Value Gap (FVG) in trading?
A Fair Value Gap is a three-candle imbalance pattern where the second candle moves so aggressively that a gap remains between the first and third candle wicks. It represents a price inefficiency that price tends to return and fill. FVGs are high-probability entry zones in Smart Money Concepts trading.
What is the difference between FVG and IFVG?
An FVG (Fair Value Gap) is the original imbalance zone. An IFVG (Inverse Fair Value Gap) forms when the original FVG is broken through — the bullish FVG becomes a bearish resistance zone (or vice versa). IFVGs are considered more powerful because they have additional confirmation.
How do you identify a Fair Value Gap on a chart?
Look for three consecutive candles where the middle candle is a strong impulse. Check if the high of candle 1 (for bullish FVG) is below the low of candle 3. The gap between them is the FVG zone. Most trading platforms and TradingView indicators can highlight these automatically.
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