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FVG: read three candles, not an empty promise
A coloured rectangle looks clever. Can you explain its two boundaries?
Identify a three-candle wick gap and distinguish it from proven fair value.
FVG means Fair Value Gap; the chart term is not a verified valuation model. For our bullish FVG sketch, the first candle high is below the third candle low, with a strong middle move. The marked interval is between those two wick extremes.
The middle candle traded through the area. FVG does not mean every price in the rectangle was never traded, and its name does not establish economic fair value.
Wait until candle three closes before treating the observation as confirmed. During formation, the third candle can extend back into the proposed gap and remove it.
A later revisit may react, cross completely or never happen. Define the near edge, midpoint and invalidation separately before testing an entry idea.
Let’s work through it
- Mark the reference before revealing the outcome.
- Identify a three-candle wick gap and distinguish it from proven fair value.
- Record the result and the conditions that would reject the idea.
Let’s use numbers · hypothetical example
Candle 1 high 100 and candle 3 low 102 form a 100–102 bullish interval after candle 3 closes. Its midpoint 101 is arithmetic, not a guaranteed bounce level.
Easy mistakes to watch for
- Mistaken assumption: The middle candle body only.
- Changing the definition after seeing the result.
- Ignoring spread, slippage or the loss limit.
Keep in mind
This is a hypothetical study, not a signal. A chart label cannot identify institutional intentions or guarantee a result; include costs and a predefined loss limit.
Your turn
Draw ten three-candle sets, including examples where the third candle removes the apparent gap.
A quick check before we move on
Which prices bound this bullish FVG?
- The middle candle body only.
- The next day’s closing price.
- First-candle high and third-candle low.
Check answer
First-candle high and third-candle low. The non-overlap is measured between the outer candles’ wick extremes.
Sources and further reading
Content reviewed: 29 October 2026
Educational material with hypothetical examples. Trading can cause substantial losses. A course, pattern, stop order or past result cannot guarantee a profit or limit every loss. Practise in simulation and check current rules and product terms in your jurisdiction.
