Fair Value Gaps

About this book

Fair Value Gaps begins with exact three-candle geometry so the concept is defined before interpretation. A gap is identified from the relationship between the first and third candles, while displacement, gap size, volatility, spread, slippage and economic significance are treated as separate filters. The book warns against retrospective adjectives such as clean or institutional unless their properties were specified before the next candle printed.

Market structure and liquidity sweeps are then layered around the FVG, with swing definitions stated explicitly so confirmation cannot move with hindsight. Inverse Fair Value Gaps are introduced as failed prior expectations rather than automatic role reversals. Measurable rules, invalidation, no-trade cases and testing are used to turn a popular visual concept into a reproducible research and execution framework.

What you will learn

• Define bullish and bearish FVG geometry objectively before adding discretionary filters.
• Measure gap size relative to price, ticks or volatility instead of judging only by visual width.
• Connect FVGs to explicitly defined structure and liquidity events.
• Treat an iFVG as a new hypothesis after failure, not an automatic opposite signal.
• Write measurable filters before outcome so backtesting remains reproducible.

Key topics

• Fair Value Gaps
• Three-candle imbalance
• Displacement
• Gap size
• Market structure
• Liquidity sweeps
• Inverse FVG
• Invalidation
• Trading costs
• Backtesting

Who this book is for

For SMC, ICT and price-action traders who want a stricter definition of Fair Value Gaps and a method that can be tested before outcomes are known.