Forex glossary
Fair Value Gap (FVG)
An FVG in SMC/ICT terminology is a zone between the extremes of candles one and three in a three-candle structure. For a bullish gap, the first high is below the third low; the bearish geometry is reversed. The middle candle usually traverses this zone, so it does not prove an absence of trades.
Illustrative example
How does it work in practice?
Assume the first EUR/USD candle has a 1.1000 high and the third a 1.1020 low. The FVG zone spans twenty pips; the middle candle may have traded through it during the upward move.
A case to work through
A zone traversed by the middle candle
Hypothetically, H1=100 and L3=103; the middle candle spans 99–105.
- The first and third extremes define a bullish zone of 100–103.
- The middle candle covers that zone, so the geometry does not prove no trades occurred there.
What follows? Mark the zone without assigning zero volume to it.
Example boundary: OHLC reveals neither every trade nor an obligation to fill the zone later.
A useful distinction
Fair Value Gap (FVG) / Breakout
FVG compares extremes of nonadjacent candles; breakout compares price with a previously defined boundary.
Check your understanding
Locate an FVG zone and identify its inference limit.
Show the answer and explanation
Non-overlap of the first high and third low
That is the defining relationship for this zone.
Market data and interpretation limits
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Related terms
Sources and documentation
- LuxAlgo – FVG imbalances
This implementer's three-candle non-overlap geometry; it is not proof of no trading.
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