advanced · TRADING LEARNING GUIDE
Fair value gap
What is this concept?
A three-candle gap convention can mark non-overlap between the first and third candle's extremes. It is a chart definition, not proof that price must revisit the area.
Step by step
Use completed candles and explicit bullish/bearish inequalities. Distinguish first touch, partial fill and full fill. Define expiry and execution rules separately.
From observation to decision
Record the instrument, venue, session and timeframe. Classify the observation using the definition, then write at least one alternative interpretation. Decide what evidence would invalidate your idea before entry. Mark missing information explicitly. Examples are hypothetical. Collect paper observations, including failures. Include fees, spread, slippage and timestamp alignment when measuring outcomes. Recognizing a chart shape and establishing a profitable trading rule are separate tasks.
Worked example
First candle high 100, third candle low 103 create a bullish 100–103 interval. A revisit to 102 is partial; it has not reached 100 for full fill.
Common mistakes and limits
Avoid claiming every marked gap must fill or moving boundaries after observing results.
Practice
Mark gaps with fixed boundaries and track untouched, partial and complete revisits over a fixed horizon.
Resources and further reading
These sources explain definitions and underlying mechanics. Worked examples are original illustrations; a source does not establish the profitability of a custom pattern.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.