What a Fair Value Gap actually is
An FVG is a three-candle pattern. Candle 1 prints a wick. Candle 2 displaces price aggressively in one direction. Candle 3 opens beyond candle 1's wick, leaving a range of untraded price between them. That untraded range is the imbalance — price skipped an area where willing buyers and sellers never met, and the market often returns to rebalance it before continuing.
Why FVGs matter for Smart Money Concepts
- Institutional displacement. Real size can't be absorbed at every tick — when desks push, they leave gaps. FVGs show you exactly where.
- Objective entries. Instead of guessing a "good level", you enter on a specific, chart-derived zone the market has already reacted to.
- Confluence with order blocks. The strongest setups pair an FVG with an order block or a liquidity sweep — Vision AI flags this stack automatically.
- Tight, logical stops. Your invalidation is the swing that created the imbalance — not a round number, not an ATR guess.
Bullish vs bearish FVGs
A bullish FVG forms in an up-move: the low of candle 3 sits above the high of candle 1, leaving a gap that acts as demand on the retrace. A bearish FVG is the mirror: the high of candle 3 sits below the low of candle 1, leaving supply overhead. In both cases the mid-line of the gap tends to be the most reactive level.
A Vision AI workflow for FVG trading
- Screenshot the higher-timeframe chart (4H or 1H) with recent structure visible.
- Upload — Vision AI marks bullish and bearish FVGs and tags the ones aligned with the higher-timeframe trend.
- Drop to the entry timeframe (15m or 5m) and screenshot again into the tagged gap.
- Wait for a reaction at the 50% mid-line — rejection wick, order-block flip, or liquidity sweep.
- Enter with a stop beyond the imbalance swing; target the next opposing liquidity pool.
FVG in context: order blocks, sweeps, and traps
FVGs rarely trade in isolation. The clean setups pair a gap with an order block or a liquidity sweep that just fueled the displacement. For the wider framework, see the Smart Money Concepts guide and the whale-trap detection guide. For placing stops that survive the retest of the gap, the AI stop-loss guide covers structural placement.
Common FVG mistakes
- Trading every micro-gap on the 1m chart — most are noise, not institutional prints.
- Ignoring higher-timeframe trend — a bullish FVG inside a bearish 4H is likely to fail.
- Entering on the edge instead of waiting for a mid-line reaction.
- Placing the stop at the mid — invalidation belongs beyond the swing.
Frequently asked questions
What is a Fair Value Gap (FVG)?
A Fair Value Gap is a three-candle price imbalance where the wick of the middle candle leaves an untraded range between the first candle's wick and the third candle's wick. It marks where price moved too fast for two-sided auction — an inefficiency that price often revisits before continuing.
How does Vision AI detect Fair Value Gaps?
Vision AI reads the raw chart image and marks bullish and bearish FVGs directly on the structure — no manual drawing. It also filters gaps by the higher-timeframe trend so you trade only with-context imbalances, not every micro-gap.
Is FVG trading part of Smart Money Concepts?
Yes. FVGs sit alongside order blocks, breaker blocks, and liquidity sweeps in the SMC toolkit. They are the visual footprint of institutional order flow — where price displaced hard enough to leave inefficiency behind.
What's the best entry on an FVG?
Wait for price to return into the gap, look for a rejection wick or an order-block reaction at the 50% mid-line of the FVG, and enter with a stop beyond the swing that created the imbalance. Vision AI flags exactly which mid-line is respecting price.
Do FVGs work on stocks and crypto?
Yes — the pattern is asset-agnostic. FVGs form on any liquid market: stocks, indices, futures, and crypto, on any timeframe from 5m to weekly. Vision AI applies the same reading logic across all of them.
Let Vision AI mark the gaps for you
Screenshot any chart — Vision AI returns bullish and bearish FVGs, mid-lines, and a full entry / stop / target plan. First analysis free, no account required.