Fair value gaps, explained honestly

A fair value gap (FVG) is a three-candle pattern where price moved so fast it left a small unfilled zone — an "imbalance" the market may later come back to rebalance.

Look at three candles in a row. If the first candle's wick and the third candle's wick don't overlap, the middle candle covers a price range that only traded through once, very quickly. That untraded gap between the first and third wicks is the fair value gap. The theory: price left "unfair" prices behind, and often returns to trade through them — to fill the gap — before continuing.

How traders use it

• Spot the imbalance: a fast three-candle move where wick 1 and wick 3 leave a gap.
• Mark the zone between those two wicks.
• Expect a return: many traders anticipate price revisiting the gap, and use the reaction there to time entries.

So is it useful?

An FVG is a real, objective feature of the chart — unlike some smart-money ideas, you can define it precisely and a computer can find it. That makes it testable, which is the whole point. The useful question isn't "do gaps fill?" but "how often does price return to this specific kind of gap, under these conditions — and is that edge big enough to trade after costs?"

How to test it yourself

• Box the gap on a frozen chart — no peeking at what happens next.
• Make a real call: FILL or UNFILLED, with a confidence level.
• Reveal and score. Do it many times and watch your hit-rate — and whether your confidence matches reality.

That's the fair-value-gap lab on fxhomelab: mark the imbalance, call it, and get scored against what price actually did. The convention gets tested against your own record instead of a guru's promise.