Fair Value Gap (FVG): the imbalance — read this first

7 min 55 XP

What a Fair Value Gap is

When price moves sharply in one direction, it moves so fast it leaves a gap of unfilled orders behind. That is a Fair Value Gap (FVG), also called an imbalance (IMB). You read it on three consecutive candles: if the wick of candle 1 and the wick of candle 3 do not overlap, the empty distance between them is the FVG. In a bullish move it is the space between candle 1's HIGH and candle 3's LOW; in a bearish move, between candle 1's LOW and candle 3's HIGH.

Why it matters for everything next

The market dislikes inefficiency and tends to return to fill an FVG. More importantly for this module: a candle is only a valid Order Block if it took liquidity AND left an FVG behind it. No imbalance, no order block. That is why we learn the gap first.

Valid FVG ✅

Candle 1 and candle 3 wicks do NOT overlap.
Born of a strong displacement (a big body).
Still unfilled = unmitigated = a live magnet.

Mitigated / none ❌

Mitigated: price returned and filled the gap — used up.
None: candle 1 and candle 3 overlap — no gap at all.
A weak, overlapping move leaves no imbalance.

FVG / imbalance = a 3-candle gap left by a fast move.
Bullish FVG = candle 1 high → candle 3 low (no overlap).
Bearish FVG = candle 1 low → candle 3 high (no overlap).
Unmitigated = still open (a magnet); mitigated = filled, used up.
A valid Order Block MUST leave an FVG behind it — learn the gap first.

Praxis.

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Level 2: Technical Analysis

M7 · Order Blocks · Lesson 118/144