Fair Value Gaps

Intermediate

Progress8/15

A **Fair Value Gap (FVG)** occurs when three consecutive candles create a "gap" where price moved so fast that little to no trading occurred.

- **Bullish FVG** — the high of candle 1 is below the low of candle 3 - **Bearish FVG** — the low of candle 1 is above the high of candle 3

Price tends to return to these gaps to "fill" them before continuing in the original direction.

Knowledge Check

7 questions

1.How many candles are involved in identifying a Fair Value Gap?

TwoThreeFourFive

2.A Bullish FVG occurs when:

The high of candle 1 is below the low of candle 3The low of candle 1 is above the high of candle 3All three candles are bearishCandle 2 has no body

3.A Bearish FVG occurs when:

The high of candle 1 is below the low of candle 3The low of candle 1 is above the high of candle 3All three candles are bullishCandle 2 has no wicks

4.Why do Fair Value Gaps form?

Because of low broker liquidityBecause price moved so fast that little trading occurred in that areaBecause of weekend gaps onlyBecause of incorrect chart settings

5.What does price often do when it returns to an FVG?

Reverse immediately with no reactionFill the gap before continuing in the original directionStop trading entirelyAlways break market structure

6.A Fair Value Gap represents an area of:

Perfect price efficiencyInefficient or imbalanced price deliveryGuaranteed reversalZero volatility

7.After filling an FVG, price typically:

Reverses permanentlyContinues in the original directionStops moving for a weekTriggers a market holiday

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