EducationDec 14, 20254 min read

Fair Value Gap Explained

Fair Value GapFVGPrice Imbalance
Fair Value Gap Explained
A Sign Of Time

Written by

A Sign Of Time

Head of Education & Toodegrees Analyst

Key Summary

  • Fair value gaps represent price imbalances.
  • They occur during strong momentum moves.
  • Markets sometimes revisit them later.
  • Traders use them as retracement zones.

Description

A fair value gap is a price imbalance created when markets move rapidly in one direction. This leaves an area between candles where little trading occurred. Because the market did not fully transact within that zone, price sometimes returns to rebalance the imbalance.

Key Questions

Fair Value Gap Characteristics

CharacteristicExplanationTrading Use
FormationStrong impulse moveIdentify imbalance
StructureThree-candle patternEntry zone
BehaviorRetracementContinuation potential

Price imbalance concepts are widely discussed in price-action trading research.

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