Fair Value Gaps (FVGs) are now one of the most popular trends in the trading market. However, most traders are unable to make money from them consistently. The reality is that although FVGs are extremely powerful, not all FVGs are equal. Some function flawlessly, while others fail abruptly—leaving traders frustrated and perplexed.
This article deconstructs a secret method that eliminates that issue. If you’ve ever wondered, “Why did this fair value gap succeed but the other one didn’t?”—you’re soon going to discover why. I discovered a secret to fair value gaps that significantly enhances their profitability and accuracy. Using these six criteria, you’ll immediately know which gaps to trade and which to leave alone.
Let’s get into what a fair value gap is actually, how one is valid, and the hidden six-step method that will improve your trading precision.
What is a Fair Value Gap?
A Fair Value Gap (FVG) is a discrepancy developed when price rushes in one direction and creates a large candle. The swift move generally doesn’t permit the opposite side (buyers or sellers) to respond, creating a market discrepancy.
Bullish and Bearish FVGs
Bullish FVGs: Price rockets up, producing a big green candle.
Bearish FVGs: Price crashes, producing a big red candle.
To spot an FVG, place the top wick of the candle prior to the big move, and the bottom wick of the candle subsequent to the move. This space creates the fair value gap.
Usually, price will come back to this gap, fill the imbalance, and reverse—allowing traders to profit. But once more, it doesn’t always work.
What Makes a Fair Value Gap Valid?
The key to knowing why some FVGs work and others don’t is crucial. I discovered a secret to fair value gaps by finding six potent criteria that need to be satisfied for a gap to be valid.
1. The Fair Value Gap Needs to Remain Unmitigated
The whole reason for an FVG is that price did not provide the other side with time to respond. Thus, the zone has to be left untested after it is created.
- If price touches the gap immediately after it has been created, the FVG is unmitigated and of no use.
- Untested FVGs are the only ones that provide the imbalance necessary for high-probability trades.
2. Candle Reaction Should Close Inside or in Direction of the Gap
How price reacts when it gets back to the FVG is important.
- If a candle closes within the FVG or in the trend direction, it’s valid.
- If the candle closes outside the zone (particularly against the trend), the FVG is not valid.
- Wicks that break through are fine as long as the body closes normally.
This step gives a solid confirmation for entry.
3. Add Support and Resistance Confluence
The third validation method is all about confluence.
When an FVG corresponds to a support level (for bullish gaps) or resistance level (for bearish gaps), the likelihood of a successful trade becomes tremendous.
Example: A bullish FVG at a horizontal support level turns into a much stronger area.
Using FVGs in conjunction with fundamental technical analysis tools improves trade dependability.
4. Prioritize Fair Value Gaps by Their Location
Not all FVGs on a chart are equal.
- Bullish FVGs: The smallest gap on the chart takes priority.
- Bearish FVGs: The largest gap is most important.
This principle keeps you working with the most significant zones, not merely every FVG that shows up.
5. Apply the Gann Box Tool to High-Priority Gaps
The Gann Box provides an added level of confirmation.
- On TradingView, set the Gann Box levels to 0, 0.5, and 1.
- For long setups: plot from the low to the high of the move.
- For short setups: plot from the high to the low of the move.
- Trade only FVGs that show up in the lower half for longs and the upper half for shorts.
This tool visually weeds out weak FVGs, keeping your chart clean and your trades sharp.
6. Must Contain a Break of Structure (BOS)
This is the last but most important aspect. I discovered a secret to fair value gaps by observing how price needs to break structure prior to creating the gap.
- Break of Structure (BOS) indicates price breaking a prior high (bullish) or low (bearish).
- An authentic FVG should result from a BOS to validate trend continuation and power.
- Without a BOS, the gap is most likely just noise and not worth trading.
Live Trade Example
Let’s go through an actual example with all six factors:
- Price makes a high → we note this as our BOS point.
- Price breaks this high → validates a good BOS.
- A fair value gap is created → we make sure it’s unmitigated.
- With the Gann Box, we notice it is in the lower half → high priority.
- We identify a support level half way through the FVG → good confluence.
- Price heads back to the gap and fills in within the zone → signals entry.
- Starting here, we place:
- Take Profit at last high.
- Stop Loss below FVG candle’s low.
And the outcome? Price bounces exactly, and the trade becomes profitable.
Conclusion
I discovered a key to fair value gaps that has revolutionized the way I trade. When you use these six requirements—unmitigated gaps, correct candle reaction, confluence with support/resistance, priority by location, Gann Box confirmation, and break of structure—you can significantly amplify your win rate using FVGs.
Fair Value Gaps aren’t just a trend. They are a powerful tool when used correctly. Add this secret technique to your arsenal, and you’ll instantly see your trades become more accurate and profitable.