What are fair value gaps in trading?

In the trading of stocks and currencies, the use of fair value gaps in trading strategies has recently grown. Fair value gaps are a price action concept popularized by the ICT (Inner Circle Trader). They locate areas of imbalance on a chart where traders can enter positions to profit.

What causes fair value gaps?

Fair Value Gaps can materialize through various events and conditions in the market. Rapid price fluctuations following economic reports, unforeseen events, or corporate announcements often lead to temporary price gaps between market price and fair value. Several triggers can lead to the creation of Fair Value Gaps.

What is fair value gap (FVG)?

In this article, we will use the term Fair Value Gap (also referred to as FVG). Fair Value Gap indicates a market situation where the supply of buyers is significantly higher or lower than the demand of sellers. This can cause the price of an instrument to move quickly towards higher supply or lower demand.