What a fair value gap is
Look at any fast move on gold and you will find a candle so large that the candles on either side of it do not touch. The price range between those two outer wicks was traded in one direction only. Buyers (or sellers) were so aggressive that the other side barely had a chance to trade. That one-sided range is the fair value gap, sometimes called an imbalance or an inefficiency.
Every FVG has three parts. Candle 1 is the candle before the move. Candle 2 is the displacement candle, the big body that does the work. Candle 3 is the candle after it. The gap only exists if candle 3’s wick stays clear of candle 1’s wick. If the wicks overlap by even a few cents, there is no FVG, however big candle 2 looks.
How to draw it: wick to wick
The rule is short and it never changes:
- Bullish FVG: from the high of candle 1 up to the low of candle 3.
- Bearish FVG: from the low of candle 1 down to the high of candle 3.
- Extend it to the right until price trades back through it, and mark the 50% line in the middle.
Why wicks and not bodies? A wick is a price that actually traded. If you draw from body to body, your zone includes prices where both buyers and sellers already traded, so it is wider than the real gap and gives you a false picture of where the imbalance sits. On gold, where one M15 candle can travel $10 (100 pips) or more, the difference between body and wick can be several dollars. Draw from the real candle where the gap formed, with its exact high and low, not from a rounded number.
Size matters too. A gap of a few cents on M15 is often just spread and noise. We only mark gaps that are clearly visible, roughly a dollar (10 pips) or more on M15, and larger on H4.
What an FVG tells you, and what it does not
An FVG is evidence of displacement: a move with real intent behind it. That is useful, but only in the right place. The question is never “is there a gap?” but “did the move that left the gap break structure?”
- FVG inside the leg that breaks structure: strong evidence that the break is real. This is the gap we care about.
- FVG with no break of structure: just a fast candle. Gold prints these all day around news, and on its own it tells you very little.
- Price often comes back into the gap. Many traders read a filled gap as “job done”. In practice price frequently trades through the whole FVG on its way to the order block below or above it.
Where the FVG fits in our entry model
We use the FVG as proof, not as the entry. The sequence on the chart is fixed:
- Liquidity is taken. A clear old high (buy-side liquidity) or old low (sell-side liquidity) is swept. See liquidity sweeps on gold.
- CHoCH by body close. A candle body closes beyond the external swing that led to the last high or low. That is the break of market structure (BMS). A wick does not count. Count the swings first, as in CHoCH vs BOS.
- The CHoCH leg leaves an FVG. This confirms displacement. Draw it wick to wick.
- The order block of the CHoCH leg is the zone. It is the last opposite candle before the leg: the last up candle before a bearish leg, the last down candle before a bullish one.
- Retest. Only when price comes back to that order block is the idea confirmed. No break and retest, no trade.
Notice where everything sits in this illustration. The FVG is directly below the order block, because the order block candle is also candle 1 of the gap. When price retraces, it fills the FVG first and only then reaches the order block. Traders who act at the first touch of the gap are early; the order block is where the CHoCH leg actually started.
A real example on gold
This is our own M15 data from 28 to 29 October 2026, and it is not a clean win, which is why it is worth studying. Everything in the model appears: the equal lows at 4,051.00 are taken, a candle body closes above the 4,058.50 swing high, and the leg leaves a $12.50 (125 pips) FVG from 4,040.50 to 4,053.00 above an order block at 4,036.50–4,040.50.
Then price does exactly what the last section described. It fills the entire FVG, reaches the order block, and bounces about $10. A few candles later a body closes below the order block. That close cancels the idea. The FVG did not “hold”, and the order block did not either. This is why the stop idea sits beyond the zone and why position size is fixed in advance with the lot size calculator: a valid setup can still fail.
When price never comes back
The opposite case is just as common. After the CHoCH, the pullback dips into the FVG, turns there and never reaches the order block. It is tempting to buy the gap “because it held”. In our method there is no trade: the zone was the order block, and it was never retested. Missing some moves is the price of a rule that keeps you out of the ones that fail.
Common FVG mistakes on gold
- Drawing body to body. The zone becomes too wide. Always wick to wick.
- Marking every gap. Gaps without a structure break are noise. Start from the CHoCH leg.
- Entering at the first touch of the FVG. Price often runs through the whole gap to the order block.
- Ignoring news. CPI, NFP and FOMC releases print huge gaps in seconds. Our scanner stands aside from 60 minutes before to 45 minutes after marked high-impact news.
- Using the wrong timeframe. We read structure and zones on H4 and look for the CHoCH, the FVG and the order block on M15. The sessions guide shows when gold usually moves.
To practise, open the free Gold Liquidity Map, find the nearest liquidity, and wait for a sweep, a CHoCH by body close and the FVG it leaves. The Liquidity Alerts page tracks each of those steps live.