Lesson 2
What is a Fair Value Gap (FVG)?
Last updated: 2026-09-28
Quick answer
A fair value gap is a price area that a fast move skipped, seen as a gap between the wick of candle 1 and the wick of candle 3 in a three-candle move. Price often returns to fill part of that gap before continuing.
How to spot one
- •Bullish FVG: in three candles moving up, the high of candle 1 is below the low of candle 3. The space between them is the gap.
- •Bearish FVG: in three candles moving down, the low of candle 1 is above the high of candle 3.
- •The middle candle is usually large and strong.
How traders use it
- 1.Mark the top and bottom of the gap.
- 2.Wait for price to return into it.
- 3.Many SMC traders enter around the middle of the gap (called “consequent encroachment”).
How the TebotechSignals engine uses it
The engine only looks for a fair value gap inside the move that broke structure, after a liquidity sweep. The entry is placed at the middle of the gap, and the setup is cancelled if price fills the whole gap before the entry.
Common mistakes
- •Treating every small gap as important. The best ones come from strong, structure-breaking moves.
- •Entering before price returns to the gap (chasing).
- •Ignoring the higher-timeframe direction.
Educational content only, not financial advice. Trading forex and gold carries a high risk of loss.