A three-candle pattern where the first and third candle wicks do not overlap, leaving a price range that traded only once and quickly.
A fair value gap, also called an imbalance, forms during a fast move. The middle candle is large, and the gap between candle one's high and candle three's low (for a bullish FVG) is a range the market skipped through.
The idea is that price tends to revisit these areas to fill them, similar to the logic of a gap fill or a low-volume node on a volume-profile. Many FVGs fill; many do not. Treat them as zones of interest.
Example: three 5-minute candles: high $100.50, then a surge candle from $100.40 to $102.80, then a candle with a low of $101.90. The FVG is $100.50 to $101.90.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The parts of a candlestick. One candle sums up a slice of time: the thick real body runs from the opening price to the closing price, and the thin wicks reach out to the highest and lowest prices traded. Colour tells you which way the body ran.
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