ICT Decoded · Fair Value Gaps (FVG)
What Is a Fair Value Gap (FVG) in ICT Trading?
By Steve H — reads every firm’s official rulebook, checks prices and codes daily, and maintains the Enigma Score · Methodology · Editorial policy · Last updated October 31, 2026
ICT concepts were created and are taught by Michael J. Huddleston, The Inner Circle Trader (X · YouTube). This lesson is FundedEnigma’s own summary, not affiliated with or endorsed by ICT.
In short: An ICT fair value gap (FVG) is a three-candle pattern where the first and third candles do not overlap, leaving a gap beside a fast middle candle. Mark it wick to wick; its 50% is consequent encroachment. While candles keep closing on the right side, the gap holds; a body close beyond it means it failed.
What Is a Fair Value Gap? How to Spot an FVG and Read What Price Does Next (ICT) · 6:15 · published October 31, 2026 · part of the ICT Concepts Decoded playlist
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The full video is embedded above this article: What Is a Fair Value Gap? How to Spot an FVG and Read What Price Does Next (ICT). This page is the written version, with every chart walked through step by step. Jump to any part of the video:
Key facts: fair value gaps at a glance
| Term | What it is | How it is used |
|---|---|---|
| Bullish FVG | Candle 1's high below candle 3's low | A gap price may come back down into |
| Bearish FVG | Candle 1's low above candle 3's high | A gap price may come back up into |
| Consequent encroachment (CE) | The 50% of the gap | The level price most often respects |
| Minimum size | At least 2 ticks and 0.1 x the average candle range | Smaller gaps are noise |
| Fresh / tested / filled | Not revisited / traded into the near edge / traded to the far edge | The gap's life so far |
| Inverted | A candle body closes beyond the far edge | The gap has failed |
| Balanced | Earlier candle bodies already traded through the gap's prices | Drawn, but not treated as an inefficiency |
Last verified 2026-10-31. All charts below are real historical CME NQ futures data, shown in New York time.
Here is the idea on one chart. On June 4, 2026, the 11:00 fifteen-minute candle on NQ rallied nearly 100 points and left a gap behind it. Price came back, dipped to within three points of the gap's far edge, and no candle closed below it. At 12:21 price was above the high.
What does a fair value gap do in trading?
It marks where price ran on one side only: buyers met almost no selling, or the other way round. That one-sided stretch is the inefficiency. It usually shows up inside displacement, the energetic leg that moves price away; a move that leaves no gap is often a weak one.
Bullish FVG vs bearish FVG
In a bullish gap, the first candle's high sits below the third candle's low. In a bearish gap, the first candle's low sits above the third candle's high. If the first and third candles overlap, there is no gap.
How do you spot and mark a fair value gap?
Draw it wick to wick: for a bullish gap from candle 1's high to candle 3's low, for a bearish gap from candle 1's low to candle 3's high. Then mark its 50%.
- Keep a minimum size. A gap of a tick or two, or one that is tiny next to the average candle, is noise.
What is consequent encroachment?
Consequent encroachment (CE) is the 50% of a fair value gap. It is the level price most often respects when it works back into the gap.
When is a fair value gap filled or invalid?
It is filled when price trades to the far edge, and it has failed (inverted) when a candle's body closes beyond the far edge. Wicks into a gap are normal; the close decides.
- Fresh: price has not come back to it.
- Tested: price trades into the near edge.
- CE: price reaches the 50%.
- Filled: price trades to the far edge.
- Inverted: a body closes beyond the far edge. A failed bullish gap can turn into resistance, and a failed bearish gap into support.
Gaps that don't count
- Gaps inside a balanced range. If earlier candle bodies already traded back and forth through the same prices, the gap is not an inefficiency. Draw it if you like, but do not lean on it.
- Tiny gaps. Under the minimum size, it is noise.
- Two stacked gaps in the same move: price often reaches the deeper one first.
- No context. A gap is a place to watch, not a signal on its own. Read it with where it sits: after a liquidity sweep, or in discount for a long and premium for a short.
What do fair value gaps look like on real charts?
One bullish gap that holds and one bearish gap that fails, both on the 15-minute chart.
Example 1: a bullish gap that holds, NQ 15-minute, June 4, 2026
- Candle 1 is the 10:45 candle, high 30,360.00. Candle 2 is the 11:00 rally. Candle 3 is the 11:15 candle, low 30,431.50.
- That is a 71.50-point gap, with consequent encroachment at 30,395.75. None of the ten candles before it has a body covering those prices, so it is not sitting in balance.
- Price tests the gap at 11:31 and reaches the 50% at 11:47. At 11:51 it dips to 30,363.00, three points above the far edge.
- No 15-minute candle closes below the gap. Through the 16:00 close, the lowest close is 30,413.75 (the 11:45 candle), back above the 50%.
- The gap holds. At 12:21 price trades above the 11:15 high (30,469.50), and at 15:30 it reaches 30,603.25.
Example 2: a bearish gap that fails, NQ 15-minute, May 19, 2026
- Candle 1 is the 09:45 candle, low 28,868.75. The 10:00 candle drops hard. Candle 3 is the 10:15 candle, high 28,755.00.
- That is a 113.75-point bearish gap, with consequent encroachment at 28,811.875. Price bottoms at 28,663.00 at 10:22.
- Price tests the gap at 10:31 and reaches the 50% at 11:01. The 11:00 candle closes above it, at 28,827.75: the first warning.
- At 11:42 price trades through the top of the gap: it is filled. At 12:15 a 15-minute body closes above the gap, at 28,910.75.
- The gap is inverted: it failed as resistance. At 13:23 price reaches 29,126.50.
How do you use fair value gaps in your own charting?
Use a gap as a place to watch when price returns, and judge it by the closes. Wicks into the gap are normal; a body close beyond the far edge ends it.
- Say which gap. Name the timeframe, both edges and the CE.
- Skip the noise. Tiny gaps and gaps inside balanced ranges are not inefficiencies.
- Pair it with the market structure shift, premium and discount and the optimal trade entry: a gap left by the displacement that shifts structure, sitting in the right half of the range, is the cleanest case.
More concepts in the series are on the ICT Concepts Decoded hub. If you trade futures with a prop firm, you can look up a firm's rules on the challenges page or set two firms side by side on the compare page.
Frequently asked questions
What does FVG stand for?
Fair value gap: the three-candle gap ICT describes, where the first and third candles do not overlap.
Do you mark a fair value gap with wicks or bodies?
On this page, wick to wick: candle 1's high to candle 3's low for a bullish gap, and candle 1's low to candle 3's high for a bearish gap.
Does price always come back to fill a fair value gap?
No. Many gaps are never revisited, and some are only tested at the near edge before price moves on.
Which timeframe should I use for fair value gaps?
The timeframe you are reading. The examples here use 15-minute gaps; say the timeframe whenever you name one.
What is an inverted fair value gap?
A gap that a candle body has closed through. It failed in its original role and can act the other way: a failed bullish gap as resistance, a failed bearish gap as support.
How do you trade a fair value gap?
This page does not give trade signals. It shows how to mark a gap, follow its life and judge it by the closes, together with where it sits in structure and the range.
Sources
- Concept: fair value gaps and consequent encroachment as taught by ICT (The Inner Circle Trader, Michael J. Huddleston), who originated these terms. The explanation, examples and charts on this page are our own.
- Data: every chart is real historical CME Nasdaq-100 E-mini (NQ) futures data, shown in New York time.
- Video: What Is a Fair Value Gap? How to Spot an FVG and Read What Price Does Next (ICT), FundedEnigma.
Last verified: 2026-10-31. Written by Steve H.
Disclaimer: This page is for education only and is not financial advice. Trading futures involves substantial risk of loss. Past price behaviour does not guarantee future results.
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