How to Identify a Fair Value Gap

A fair value gap (FVG) shows where a price movement was so rapid that an imbalance remained. Holden from the NinjaTrader team explains how fair value gaps function, how to recognize bullish and bearish FVGs, and how traders apply a fair value gap strategy when planning possible entries, stops, and profit targets. To detect a fair value gap, look at three consecutive candlesticks and compare the wicks of the first and third candles. If the wicks don’t overlap, the untouched price range between them forms the fair value gap. In a bullish FVG, the first candle’s high is below the third candle’s low. In a bearish FVG, the first candle’s low is above the third candle’s high. You’ll also learn about the three-candle pattern that forms a fair value gap, displacement candles, price imbalances, return-to-fill setups, and how to tell if a gap is still active. Holden also covers how traders combine fair value gaps with support and resistance, volume-weighted average price (VWAP), volume profile, footprint charts, and higher-timeframe trends for confirmation. -------------------------------------------------------------------------------- This content is provided by NinjaTrader, LLC for educational and informational purposes only and does not constitute an offer, solicitation, or investment advice. Futures trading involves substantial risk and is not suitable for everyone; losses may exceed the initial investment, and past performance is not indicative of future results. NinjaTrader makes no representations regarding the accuracy or completeness of the information, and any third-party opinions expressed are their own and not endorsed by NinjaTrader. Testimonials and endorsements by third parties reflect individual experiences, may be solicited and/or compensated, and may not be representative of typical results. View Disclosures: ninjatrader.com/disclosures/ Futures trading involves significant risk and is not suitable for everyone. Timestmaps 0:00 - Introduction 0:28 - What is a Fair Value Gap 1:43 - Why Fair Value Gaps Appear? 2:12 - How to Find Fair Value Gaps? 3:28 - Checklist Before Placing the Trade 4:29 - Where the Fair Value Gap Thesis is Invalid? 5:33 - Common Mistakes of Trading Fair Value Gaps 6:20 - NinjaTrader Desktop Fair Value Gap Indicator 7:00 - Closing Thoughts Since 2003, NinjaTrader has been revolutionizing the way retail traders engage with futures. We've empowered our community of nearly 2 million traders with cutting-edge technology, ultra-low commissions, and world-class support. Our modern, cloud-based platform—available on desktop, web, and mobile—gives traders the freedom to seize market opportunities anytime, anywhere. The content provided is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any futures, options, or derivative products. NinjaTrader Group, LLC and its affiliates make no representations or warranties as to the accuracy or completeness of the statements or any information contained in the content and disclaim all liability. NinjaTrader Group, LLC’s affiliated companies are NinjaTrader Clearing, LLC dba NinjaTrader, Tradovate, and Kraken Derivatives US (“NTC”), NinjaTrader, LLC (“NT”) and NT Technologies, LLC (“NTT”). NTC is registered with the CFTC as a futures commission merchant (NFA ID#0309379). It carries futures trading accounts, processes futures trades, provides customer service and generates reports for its clients. NT is a software development company that owns and supports proprietary technology relating to and including the NinjaTrader and Tradovate trading platforms GET NINJATRADER: https://account.ninjatrader.com/welcome FULL RISK DISCLOSURE STATEMENT: https://ninjatrader.com/risk-disclosure-clearing/