Fair Value Gap (POI #3)

Fair Value Gap – POI #3

A Fair Value Gap (FVG) is a gap left by institutional orders when price moves so aggressively that candle wicks don't overlap. This gap acts as a POI because price is magnetized to return and fill the inefficiency.

The 3-Candle Formation

An FVG is always a 3-candle pattern:

• •Candle 1 – The setup candle (normal range)
• •Candle 2 – The impulsive candle (institutional order execution)
• •Candle 3 – The continuation candle

The FVG is the gap between Candle 1's wick and Candle 3's wick. This gap represents a price range where NO two-way trading occurred.

Why FVGs Are POIs

Markets operate on the principle of efficiency. An FVG represents inefficiency – price moved too fast. The market tends to return and "fill" these gaps before continuing in the original direction.

Think of it like a debt: the market owes a "fair price" in that range, and it almost always comes back to pay it.

Types of FVGs

• •Bullish FVG – Gap created during an upward impulse. Acts as a demand POI.
• •Bearish FVG – Gap created during a downward impulse. Acts as a supply POI.
• •IFVG (Inversion FVG) – A filled FVG that flips polarity (demand becomes supply or vice versa).

How to Trade the FVG POI

• •Identify FVGs on HTF (H4/Daily) in the direction of the trend
• •Wait for price to retrace into the gap
• •Confirm with LTF reaction (rejection candle, M1 CHoCH)
• •Enter inside the FVG with SL below/above it
• •Target the opposing liquidity pool or next POI

FVG Quality Filters

Not all FVGs are tradeable:

• •Fresh – The gap has not been filled yet (unmitigated)
• •Trend-aligned – The FVG matches the HTF structural direction
• •Proximity to OB – FVGs near Order Blocks have higher confluence

"FVGs are the market's unfinished business. Price always comes back to settle the account – and that's your entry."