{"term":{"slug":"fair-value-gap","term":"Fair Value Gap (FVG)","definition":"A price imbalance on a chart where a candle's range does not overlap with the candle two bars prior, creating a \"gap\" in fair value. Traders expect price to revisit and fill these gaps, using them as entry zones.","extendedExplanation":"Fair value gaps are a core concept in ICT (Inner Circle Trader) methodology, widely used by prop firm traders. An FVG forms when there is aggressive buying or selling that creates a three-candle pattern where the high of candle 1 does not overlap with the low of candle 3 (bullish FVG) or the low of candle 1 does not overlap with the high of candle 3 (bearish FVG).\n\nThe theory is that these gaps represent inefficient price delivery. Smart money (institutional traders) and algorithms tend to revisit these zones to rebalance order flow. Prop firm traders use FVGs as high-probability entry zones with defined risk -- entering when price retraces to the gap and placing stop-losses below/above the gap.\n\nFVGs work particularly well in prop firm trading because they provide precise entry and stop-loss levels, which helps with position sizing and risk management. A narrow FVG means a tight stop, allowing larger position sizes within your risk limits.","exampleWithNumbers":"ES 5-minute chart: Candle 1 high = 5200. Candle 2 (impulse) ranges 5200-5215. Candle 3 low = 5208. Bullish FVG exists between 5200 and 5208 (8 points). Price retraces to 5204 (middle of FVG). You enter long at 5204 with stop at 5198 (6 points below FVG low). On TopStep $100K with 1 ES contract: risk = 6 points * $50 = $300. Target: 5220 (16 points). Reward: $800. R:R = 1:2.67.","category":"strategy","relatedTerms":["order-block","market-structure","liquidity-sweep","risk-reward-ratio"]},"_links":{"self":"https://runvigil.app/api/glossary/fair-value-gap","page":"https://runvigil.app/learn/fair-value-gap","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}