Fair Value Gap (FVG)

A Fair Value Gap (FVG) is a Smart Money Concepts (SMC) term that describes a three-candle price imbalance where a large, impulsive candle moves so aggressively that the wicks of the candles immediately before and after it do not overlap—leaving a visible gap or inefficiency in the price chart where no two-sided trading occurred. This zone represents an area of price inefficiency that the market frequently revisits to rebalance. Bullish FVGs form during sharp upward moves and act as support on subsequent pullbacks; bearish FVGs form during sharp downward moves and act as resistance on pullbacks. Traders use FVGs as high-probability entry zones, anticipating that price will retrace to fill the gap before continuing in the direction of the impulse move.