Mastering FVG: The Market Imbalance Strategy Every Trader Should Know

When price action moves aggressively across your chart, it often leaves behind clues about where the market might reverse or consolidate. The Fair Value Gap (FVG) is precisely this—a critical price zone that smart traders use to anticipate market behavior and spot high-probability trading setups.

How FVGs Form on Your Trading Chart

An FVG materializes through a specific three-candlestick structure. Picture this scenario: In an uptrend, the first candle’s upper extremity doesn’t align with the third candle’s lower extremity, creating a void between them. That void is your Fair Value Gap. The opposite applies in downtrends—the first candle’s lower point disconnects from the third candle’s upper point, generating another exploitable gap. The crucial detail: no candles should overlap within this gap zone, otherwise it’s invalidated.

Why Markets Return to FVGs

Here’s the trading truth behind FVGs: markets rarely stay in disequilibrium. When price surges or plummets rapidly, it creates these temporary voids representing undervalued or overvalued zones. Think of FVGs as the market’s natural correction mechanism—they’re zones of inefficiency that the market feels compelled to revisit and “fill” before continuing its primary trend.

Spotting FVGs Like a Pro Trader

Identifying FVGs requires scanning your charts for these three-candle configurations where wicks create visible gaps. The best FVGs form during explosive price movements—these gaps tend to hold more significance than those from gradual price action. Once you spot the pattern, mark the gap boundaries clearly; these become your reference levels for upcoming price behavior.

Trading the FVG Strategy

Experienced traders use FVGs as retest zones and liquidity targets. When price revisits these gaps after a significant move, it often triggers continuation or reversal patterns. This makes FVGs invaluable for confirming entry points, setting stop losses, or identifying where momentum might accelerate.

The key is recognizing that FVGs aren’t random—they’re structural inefficiencies in price action that the market systematically corrects. Master this pattern, and you gain an edge in understanding how professional money flows through the charts.