Fair Value Gap (FVG)
In Simple Terms: A Fair Value Gap is a hole in the market where price moved so fast it skipped over prices — the market often returns to fill these gaps before continuing the original move.
A Fair Value Gap (FVG) occurs when price moves so aggressively in one direction that it creates a gap between candles where no trading occurred on one side of the market. In a bullish FVG, the low of the current candle is higher than the high of the candle two periods ago — there's a gap where selling could have occurred but didn't because buying was too aggressive. These gaps represent price inefficiencies that the market tends to revisit and "fill" before continuing the dominant trend.
FVGs are a core concept in ICT (Inner Circle Trader) methodology but are grounded in genuine market mechanics. When an institution wants to accumulate a large position, they may aggressively lift offers, creating a bullish FVG. Once the position is partially filled, they stop buying, and price often drifts back to the FVG zone where the institution can complete their accumulation at better prices. This is why FVGs act as magnets — institutional algorithms use these inefficiencies as reference points for reloading positions. Kingfisher's LiqMap adds a complementary lens: a bullish FVG that forms directly above a large short liquidation cluster is especially magnetic because the forced buying from short squeezes adds fuel to the FVG fill. Conversely, a bearish FVG below a long liquidation cluster becomes a target for the cascade.
How It Works
FVG identification:
- Bullish FVG: Candle 1's low > Candle 3's high (in a 3-candle sequence). The gap between Candle 1's low and Candle 3's high is the FVG.
- Bearish FVG: Candle 1's high < Candle 3's low. The gap between Candle 1's high and Candle 3's low is the FVG.
FVG types (by formation context):
- Breakaway FVG: Forms at the start of a trend. Rarely fills immediately — marks the beginning of a larger move.
- Continuation FVG: Forms mid-trend. Frequently fills as part of a pullback before trend resumes.
- Exhaustion FVG: Forms at the end of a trend. Usually fills and marks a reversal point.
Trading FVGs:
- Entry: When price pulls back into the FVG and shows a reversal signal in the original trend direction
- Stop: Beyond the FVG boundary (below for longs, above for shorts)
- Target: The most recent swing high/low that created the FVG (the origin of the move)
- FVGs in higher timeframes (4H, daily) are more reliable than lower timeframes (1min, 5min)
Why It Matters for Traders
- FVGs provide precise entry zones on pullbacks. Instead of guessing where a pullback ends, FVGs give specific price levels with historical precedent. A 4H bullish FVG has a 65-75% probability of producing at least a temporary bounce when tested for the first time.
- Kingfisher LiqMap + FVG is a powerful confluence. When a LiqMap liquidation cluster sits inside or just beyond an FVG, the probability of the FVG filling and reversing increases significantly. The forced order flow from liquidations acts as an accelerator through the FVG, creating a stronger reversal once the cascade exhausts.
- FVGs help distinguish between pullbacks and reversals. If price fills a continuation FVG and bounces, the trend is intact. If price blows through multiple FVGs without filling them, the trend is accelerating (momentum) or reversing — both are important regime signals.
Common Mistakes
- Treating all FVGs as equal. A 1-minute FVG has near-zero predictive value — it's noise. Focus on FVGs from 15-minute charts and above. Higher timeframe = stronger magnet.
- Expecting every FVG to fill immediately. Many FVGs take days or weeks to fill, and some never fill (especially breakaway FVGs at the start of strong trends). An unfilled FVG is not a failed signal — it's evidence of strong trend momentum.
- Ignoring FVG age. Fresh FVGs (formed within the last 10-20 candles) have the highest fill probability. Old FVGs (50+ candles ago) may never fill because the market structure that created them is no longer relevant.
Deep Dive
Want to explore further? Check out:
- Understanding Crypto Market Structure: Order Flow, Liquidity and Price Discovery
- How to Read Crypto Charts: Complete Technical Analysis Guide 2026
- Liquidation Maps: See Where Bitcoin Will Bounce or Break Through
- Toxic Order Flow: Detecting Market Manipulation in Crypto