Fair Value Gap (FVG) in the Forex Market: A Guide to Overcoming the Big Signal

Forex traders often encounter the same problem – prices move too violently to find good entry points. (Fair Value Gap) is the answer to this issue, but many people still do not understand how to use it.

What exactly is a Fair Value Gap?

FVG Forex is a price gap that occurs on the chart when the price “jumps” over a certain price range without any trading happening. This often happens during low liquidity periods, such as market open, close, or during unexpected financial news.

Most traders see FVG as a “price magnet” – prices tend to return to fill this gap in the future, making it a powerful tool for identifying excellent entry points.

Why do FVGs occur: 5 most common situations

1. Sudden news

Whether economic data, interest rate announcements, or unexpected events – significant news can cause prices to move sharply up or down, especially if most traders are unprepared to sell.

2. Market open/close

Low liquidity periods between Friday close and Monday open are straightforward – fewer traders, more volatile price movements.

3. Institutional trading

When hedge funds or banks place large orders, they can move prices quickly, creating clear gaps.

4. Imbalance of forces

When buyers or sellers dominate, they can push prices through the balanced range.

5. Daily market close

Major holidays, holiday periods, or major policy events often create abnormal gaps.

Structure of FVG: How to recognize it?

FVG consists of 3 candles with different roles:

Candle 1: Starting point – a strong move

Candle 2: The “Imbalance” (Imbalance) – this is the key signal that an FVG is forming

Candle 3: The gap is complete – the price has crossed over

Important: The gap is the space between the real body (body) of the first candle and the third candle, while the second candle does not touch this gap.

Bearish FVG vs Bullish FVG

( Bearish FVG – when traders should sell

Three red candles, strong downward movement. The gap forms from the low of the first candle to the high of the third. When the price retraces to fill the gap, it’s a selling opportunity.

) Bullish FVG – when traders should buy

Three green candles, strong upward movement. The gap forms from the high of the first candle to the low of the third. When the price retraces to fill the gap, it’s a buying opportunity.

Advantages of trading FVG

✅ Clear entry/exit points – no guessing, the chart tells you where to take profit or exit

✅ Works on all timeframes – whether trading 1-minute or daily charts, FVG remains effective

✅ Applicable in all markets – Forex, stocks, commodities, crypto – all create FVGs

✅ Easy to learn – no need to be a technical analysis expert

✅ Good timing – FVGs often offer favorable risk/reward ratios if traded correctly

Disadvantages of trading FVG

❌ Price may not return – sometimes FVGs are “broken” without filling, which is a false signal

❌ Requires confirmation – trading based solely on FVGs is usually insufficient; other indicators are needed

❌ High risk – if the market moves strongly through the FVG, you can lose quickly

❌ Hard to decide – many types of FVGs; choosing incorrectly can lead to opposite results

❌ Requires discipline – waiting for the right signals takes patience; don’t trade every day

How to trade FVG effectively: 5 key steps

( Step 1: Identify the main trend Before looking for FVGs, know whether the market is bullish or bearish. Check the 4-hour, daily, or weekly timeframe to see the bigger picture.

Uptrend: Higher lows → look for Bullish FVG Downtrend: Lower highs → look for Bearish FVG

) Step 2: Confirm the correct FVG Ensure that:

• The gap is clear and not overlapping with other candles
• There are 3 consecutive candles moving in the same direction
• The second candle does not intrude into the gap

Step 3: Wait for price to return

This is the part where many traders miss out – don’t rush in. Wait for the price to reach the FVG zone. Moreover, look for confirmation signals such as:

• Doji or Hammer candles
• Engulfing patterns ###Engulfing###
• Break of support/resistance levels

Step 4: Set stop-loss

Place your stop-loss above/below the gap depending on the trend:

• Bullish FVG: below the low of the gap
• Bearish FVG: above the high of the gap

Step 5: Set profit targets

Targets should be the next support/resistance zones where price is likely to reach:

• Bullish: at resistance levels
• Bearish: at support levels

7 tips from experienced FVG traders

1. Use multiple indicators together Stochastic, MACD, or RSI can help confirm FVG signals. Never rely solely on FVG.

2. Pay attention to time Tokyo open, London open, New York open – each session has different effects. FVGs formed during normal hours are generally more reliable.

3. Check old FVGs Charts with unfilled FVGs from months ago indicate unusual demand/supply imbalance.

4. Consider gap size Larger gaps are less likely to be filled quickly, as they require more movement.

5. Avoid trading near major resistance If the gap is close to a key resistance level, price may not fill it. Skip this setup.

6. Use small stop-losses Stops should be tight, but enough to protect your capital. When the trade doesn’t work, exit quickly.

7. Keep a trading journal Track which types of FVGs work best, on which pairs, and under what conditions. Trade only the setups that have proven profitable.

When will FVG “fail”?

FVG is not a law of nature. There are many times when prices do not fill the gap as expected:

• Strong support/resistance blocks price reversal
• Unexpected news causes a second gap after the initial FVG
• Trend reversals happen suddenly, and prices continue in the original direction (or continue downward)
• Breakouts – prices pass through the gap and then gradually return
• Fake gaps – some FVGs are just temporary fluctuations

Therefore, always combine FVG with other analysis methods. Never go all-in on a single FVG setup.

Summary: What you need to know about FVG in Forex

Fair Value Gap is a powerful tool for Forex traders seeking clear entry points. These price gaps signal rapid price movements, and most often, prices tend to return and fill these gaps later.

But remember, FVG is not a universal solution. Combining it with other indicators, proper risk management, and disciplined trading are key to success.

With practice and a deep understanding of FVG mechanics, it can become one of the most effective tools in your trading arsenal.