In trading, there are many concepts and tools that help understand market dynamics. One such tool is FVG (Fair Value Gap) — a gap or imbalance in the price chart that occurs during strong price movements. Understanding and being able to find FVG helps traders predict possible price return points and analyze the actions of major market participants.

What is FVG?

#Fair Value Gap (FVG) is an area on the chart where the price moved too quickly, leaving an uneven distribution of orders between buyers and sellers. Such zones indicate that the market may have left 'open' positions that major players will later seek to fill.

FVG represents a gap between two adjacent candles and can be useful for finding entry and exit points in trades.

What does FVG look like?

On a candlestick chart, FVG usually appears in areas of sharp movements, where:

  1. The closing of one side's candle is significantly distant from the opening of the next candle.

  2. A noticeable 'empty' gap remains between the bodies of the candles or their shadows.

FVG can be:

  • Bullish: when the market is moving up.

  • Bearish: when the market is moving down.

How to find FVG on the chart?

Step 1: Choose a timeframe

For beginners, it is best to analyze FVG on larger timeframes (1H, 4H, 1D), as such gaps are more significant and reliable.

Step 2: Look for sharp price movements

Pay attention to areas where the price has sharply risen or fallen, leaving long candles on the chart.

Step 3: Identify the gap

Compare three consecutive candles:

  • Find the gap between the low of the second candle and the high of the first if the market is rising.

  • Or between the high of the second candle and the low of the first if the market is falling.

This gap is the FVG zone.

Step 4: Check for price return

The market often returns to these zones to fill the gap. This can be used as a signal for entering or exiting a trade.

Example of finding FVG

Bullish FVG scenario:

  1. The price rises sharply, leaving long bullish candles.

  2. The low of the third candle does not reach the high of the first candle.

  3. This area between the high of the first and the low of the third candle is the FVG.

Bearish FVG scenario:

  1. The price is falling sharply, forming long bearish candles.

  2. The high of the third candle does not reach the low of the first.

  3. This area is a bearish FVG.

Why is FVG important for trading?

  1. Understanding market behavior
    FVG reflects the actions of major players who move the market. A price return to the FVG zone may be associated with their attempt to 'close' their positions.

  2. Finding entry and exit points
    FVG zones are often used as reference points for placing limit orders.

  3. Working with risks
    A price returning to the FVG can give traders the opportunity to place a stop-loss in a safe zone.

How to use FVG in trading?

1. Buy or sell signals

If the price returns to a bullish FVG, it may signal buying. If to a bearish FVG — for selling.

2. Combining with other tools

  • Support and resistance levels: If FVG aligns with an important level, it strengthens the signal.

  • Indicators: Use RSI or MACD to confirm the trend.

3. Setting take-profits and stop-losses

  • The take-profit can be placed at the opposite edge of the FVG.

  • The stop-loss is placed outside the zone.

Novice mistakes when working with FVG

  1. Blindly following gaps
    Not every FVG leads to a price return. It is important to consider the overall trend.

  2. Ignoring context
    Analyze FVG together with market structure.

  3. Incorrect choice of timeframe
    On lower timeframes, FVG appears more frequently, but their reliability is lower.

FVG is a powerful tool for analyzing market structure that helps understand the actions of major players and predict price movements. For beginners, this tool can be a useful addition to basic analysis methods.

Practice on a demo account, combine FVG with other tools, and always consider risks to learn how to use this tool most effectively.