Fair value gap
A fair value gap (FVG) is a three-candle pattern where the first and third candles' wicks do not overlap, leaving a price range that traded through quickly — interpreted as an imbalance price may later return to fill.
The pattern is mechanically simple and, unlike many chart concepts, precisely definable: if candle one's high sits below candle three's low (or vice versa), the untouched range between them is the gap. Because the definition is objective, fair value gaps can be identified programmatically without judgement.
The interpretation is that fast, one-sided movement leaves inefficiently priced territory that price tends to revisit. Markets do frequently retrace into these zones — but markets retrace generally, so the presence of retracement is not by itself evidence that the gap caused it.
Because FVGs are objectively definable, they are one of the few SMC concepts that can actually be backtested cleanly. If you use them, test them — you do not have to take anyone's word for it.
Related terms
Maintained by Jared Sinclair, Founder · Syrax Global FZCO · Definitions are educational, not financial advice.
Knowing the vocabulary is the easy part.
Every term here can be learned in an afternoon. Applying them consistently under pressure is the part that decides outcomes — and the part we measure.