In forex trading, FVG refers to a Fair Value Gap, a concept rooted in price action trading. It describes an imbalance or inefficiency in the market, where price moves rapidly in one direction, leaving gaps or areas of low liquidity. These gaps can be areas where institutional traders or large players may look to re-enter the market.

How to Identify a Fair Value Gap:

1. Three-Candle Formation:

Look for a strong impulsive move (a wide-range candle) in one direction.

This is followed by smaller candles on either side of the impulsive move, leaving a gap between the wicks of the first and third candles.



2. Imbalance in Price:

In an FVG, price moves so quickly that it doesn’t allow sufficient time for orders to fill on both the buy and sell sides.

These areas act as "magnets" for price to revisit, as the market seeks equilibrium.




Trading FVGs:

1. FVG as a Support/Resistance Zone:

If price revisits a bullish FVG (from a prior down-to-up impulsive move), it might act as support.