FVG

A Fair Value Gap forms across three consecutive candles when the high (or low) of the first candle and the low (or high) of the third candle leave an unfilled price range between them. This gap reflects a sharp, one-directional move where buyers and sellers didn't fully transact within that range — an imbalance.

SMC traders generally believe price has a high probability of returning to fill this gap later, since markets tend to revisit inefficient zones to restore two-sided liquidity. As a result, FVGs are commonly used as potential entry or take-profit zones.

Not all FVGs carry equal weight. Higher-timeframe FVGs that overlap with an Order Block or a liquidity sweep zone are typically considered higher-probability areas of interest, while FVGs formed in low-timeframe noise are far less reliable.

A common application is to wait for price to retrace into the FVG and show a rejection signal (such as an engulfing candle or long wick) before entering — rather than chasing price the moment the gap forms — to improve the entry's risk-reward ratio.