What it means
Bullish FVG (BISI): candle 1's high to candle 3's low. Bearish FVG (SIBI): candle 1's low to candle 3's high. Price often returns to rebalance the gap; context decides which gaps matter.
Example
Candle 1 high 100.9, candle 3 low 102.0: a 1.1-point bullish gap.
In practice
A fair value gap shows that price moved so quickly that only one side was properly served. Traders treat it as an area where price may return, and plan entries inside it in the direction of the move that created it.
The best gaps come from a move that broke structure, sit on the right side of the range (a bullish gap in discount), and have not been visited yet.
What to watch for
Low timeframes produce gaps constantly and most are irrelevant. A gap that price closes straight through has failed, and many traders then treat it as a level in the opposite direction.
Related terms
4 terms- Consequent encroachmentCEThe 50% level of a fair value gap (or of a long wick); healthy gaps tend to hold it.
- Inverse fair value gapIFVGA fair value gap that price closed straight through; it flips and acts in the opposite direction.
- DisplacementA fast, large-bodied move with little wick that shows intent, breaks structure and leaves fair value gaps.
- MSS and FVG entrySweep liquidity, displace into a structure shift, then enter on the retrace into the fair value gap it left.