Fair value gap (FVG)

Three candles, one gap: the imbalance price comes back to fill.

A fair value gap is a three-candle pattern where the wicks of the first and third candles don't overlap. The middle candle moved so fast that only one side of the market was served, and price often returns to that gap before it continues.

Illustration drawn by Propbook, not a real chart.

How to spot it

1
Find a strong candle (displacement) and look at the candle before and after it.
2
Bullish: the high of candle 1 is below the low of candle 3. Bearish: the reverse. The space between is the gap.
3
The midpoint of the gap, the consequent encroachment, is the level ICT watches most.

On a prop firm account

Use the far side of the gap as your invalidation: a stop beyond it is usually small enough to keep the risk inside your daily loss limit. One FVG trade per session keeps you away from overtrading rules.

Position size

Watch ICT explain it

Your notes

Videos load from youtube-nocookie.com only when you press play. © Inner Circle Trader

Related concepts

Order block

The last opposite candle before price displaced and broke structure.

Market structure shift (MSS)

A sweep, then a displacement through the last swing: the market changed its mind.

The Silver Bullet

One hour, one draw on liquidity, the first fair value gap toward it.

All videos are by Michael J. Huddleston, the Inner Circle Trader, and play from his YouTube channel. Propbook is not affiliated with ICT; this is an independent index.