# Fair Value Gap (FVG) Explained for Traders

> What is a Fair Value Gap (FVG) and how do you trade and journal it? Learn to identify FVGs, track fill rate, and measure your performance on FVG setups.

**URL:** https://traderjournal.app/smc-ict/fair-value-gap-fvg-explained-for-traders

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# Fair Value Gap (FVG) Explained for Traders

A Fair Value Gap (FVG) is a three-candle pattern where the middle candle moves so fast that price skips over a range, leaving an imbalance. Price tends to return to fill that gap before continuing its move.

## What Creates an FVG

In a bullish FVG:
- Candle 1 has a high at X
- Candle 2 is a large bullish candle
- Candle 3 has a low at Y
- **The gap between X and Y is the FVG** — price never traded there

In a bearish FVG:
- Candle 1 has a low at X
- Candle 2 is a large bearish candle
- Candle 3 has a high at Y
- **The gap between X and Y is the FVG**

## Bullish vs Bearish FVG

| | Bullish FVG | Bearish FVG |
|---|---|---|
| Direction of middle candle | Up | Down |
| Trading approach | Buy the fill | Sell the fill |
| Location for high probability | During uptrend | During downtrend |

## How to Trade FVGs

The most common approach: let price return to the FVG range and look for a reaction. Entry is typically at the 50% level of the gap (the equilibrium) or at the top/bottom of the gap.

**Higher probability FVGs:**
- Occur during a displacement move after a liquidity sweep
- Align with HTF trend direction
- Have an order block at the same level

## What to Journal for FVG Trades

Record in the Notes or Pre-trade plan:

- **FVG timeframe** (M5, M15, H1, H4)
- **Full fill or partial fill?** — Did price fill the entire gap or only reach 50%?
- **OB confluence?** — Was there an order block inside the FVG?
- **Session** — London, New York, Asian
- **Result** — Win / Loss / BE

Tag FVG trades in Trader Journal as `FVG-H1`, `FVG-M15` etc.

## Tracking FVG Fill Rate

Over time, track what percentage of FVGs in your strategy actually fill. This tells you whether your chosen timeframe and market condition produce reliable FVGs.

Also track: after filling, what percentage continue in the expected direction vs reverse through the FVG entirely. This is your true edge measurement.

## Summary

FVGs are one of the most actionable concepts in SMC because they give a precise entry zone with a clear invalidation level (below/above the full gap). Journaling your FVG trades by timeframe and session will quickly show you where your edge is strongest.