What Is a Fair Value Gap (FVG) in Trading?
A breakdown of Fair Value Gaps — how institutional imbalance zones form on a chart, how to identify them, and how TJR uses 15-minute FVGs to time entries.
A Fair Value Gap (FVG) is a three-candle pattern that marks an imbalance between buyers and sellers — a zone on the chart where price moved so quickly in one direction that it left a gap between the wicks of the first and third candle. That gap represents unfilled orders, and price will often return to it before continuing in the original direction.
How a Fair Value Gap Forms
Look at three consecutive candles:
- The first candle closes in the direction of the move.
- The second candle is the impulse candle — the one that creates the imbalance.
- The third candle's low (in a bullish FVG) sits above the first candle's high, leaving a visible gap between them.
That gap is the Fair Value Gap. It shows a shift in supply and demand — one side of the market was aggressive enough that price couldn't trade in an orderly, overlapping way.
Why Fair Value Gaps Matter
Institutional order flow doesn't fill instantly. When large orders move price fast, they leave inefficiencies behind. An FVG is a map of where that unfilled interest sits — and price has a statistical tendency to retrace into these zones before resuming trend, because the market is "rebalancing" before continuing.
How TJR Uses the 15-Minute FVG
Our strategy isolates FVGs on the 15-minute timeframe, formed during high-volume session windows — primarily the London Open and New York AM killzones. Rather than trading every gap, we filter for:
- FVGs formed after a liquidity sweep of a prior high or low
- FVGs that align with a broader Market Structure Shift (MSS)
- Retracements that tap the gap without fully closing through it
This combination — sweep, shift, and gap retest — is what turns a simple imbalance zone into a high-probability, mechanical entry.
Common Mistakes Traders Make with FVGs
- Trading every gap without confirmation from structure or liquidity context
- Ignoring timeframe — a 1-minute FVG carries far less weight than one formed on the 15-minute or higher
- Chasing price instead of waiting for the retracement into the gap
Fair Value Gaps are a tool, not a signal on their own. They work best combined with liquidity and structure — which is exactly how they're built into the TJR strategy.
Want to see these setups called out in real time? View our live trade history or get access to TJR Signals.