The three-candle idea
In a commonly used bullish definition, the high of the first candle is below the low of the third candle, leaving a price interval between them. The bearish definition is the inverse.
The exact terminology and implementation can vary between trading methodologies.
What the pattern describes
The pattern identifies rapid directional price movement with limited overlap across the three-candle sequence.
It does not directly measure the complete order book or prove that the market is fundamentally mispriced.
Does an FVG have to fill?
No. Price may revisit all, part or none of the identified interval.
An FVG is a historical price pattern. It does not create a mechanical obligation for future price to return.
Timeframe matters
FVGs can appear on many timeframes. A lower-timeframe gap may exist inside a much larger higher-timeframe move.
Make the definition testable
For quantitative research, define the candle relationship, minimum gap size, timeframe, whether wicks or bodies are used, and what counts as mitigation or fill.
FVG is a practitioner-defined price-action concept
Fair Value Gap in this context is not a standardized exchange or regulatory term. It commonly refers to a three-candle pattern in which the first and third candles leave a price interval with little or no overlap around a strong middle move.
Different communities and indicators can use slightly different qualification rules.
Define the boundaries precisely
A testable implementation should specify whether wick-to-wick or body-based boundaries are used, whether a minimum gap size is required and what counts as mitigation or a complete fill.
The rule should also define whether the pattern is evaluated only after the third candle closes.
An imbalance label does not guarantee future revisitation
The pattern identifies a historical price configuration. Price may later revisit the area, partially overlap it, trade completely through it or never return during the observation window.
Whether an FVG adds predictive value is an empirical strategy question rather than a consequence of the label itself.
A future return to the zone is not mechanically required. Test the exact definition and horizon used by the strategy.
Key takeaways
- FVG commonly refers to a three-candle non-overlap pattern.
- It describes rapid historical price movement rather than a guaranteed future event.
- Price is not required to return and fill the gap.
- Objective testing requires an exact mathematical definition.
Sources & further reading
This lesson is educational material. Market structure, exchange rules, fees, margin requirements and derivatives mechanics can differ by venue and can change over time. Verify current rules with the venue you use.