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Bearish

Bearish fair value gap: rule, chart and example

A bearish fair value gap forms when price falls fast enough that the high of the third candle is below the low of the first. The space between those two wicks is the gap.

The rule

Take three candles in a row. A gap is bearish when the high of candle 3 is below the low of candle 1. The gap is the range from the high of candle 3 up to the low of candle 1.

Schematic of a bullish and a bearish fair value gapTwo three-candle diagrams. On the left, a bullish gap: the high of candle 1 sits below the low of candle 3, with a large up candle between them. On the right, the mirror image for a bearish gap.Bullish fair value gaplow of candle 3high of candle 1gap12 (strong up)3Rule: high of 1 < low of 3Bearish fair value gaplow of candle 1high of candle 3gap12 (strong down)3Rule: low of 1 > high of 3
Diagram, not a market chart. Candle sizes are drawn for clarity. The amber band is the gap: the range between the wicks of candles 1 and 3 that candle 2 crossed.

The right-hand picture is the bearish case. Candle 2 is usually a large falling candle, but the rule does not require it. If the two wicks only touch, there is no gap.

The mirror image is a bullish fair value gap. The guide explains why either kind forms.

A bearish gap on a real chart

EURUSD15 minute2 bullish 4 bearish ยท 6 gaps by the rule
1.119001.120001.1210006:0008:0010:0012:0014:0016:00123456
  1. 1Bearish1.12036 to 1.12084formed 07:30 UTCTraded through at 12:45 UTC
  2. 2Bearish1.12003 to 1.12035formed 07:45 UTCTraded through at 08:15 UTC
  3. 3Bearish1.11939 to 1.11971formed 09:00 UTCTraded through at 09:30 UTC
  4. 4Bullish1.11953 to 1.11975formed 10:00 UTCTraded through at 10:30 UTC
  5. 5Bullish1.11932 to 1.11955formed 12:45 UTCTraded through at 16:15 UTC
  6. 6Bearish1.11964 to 1.11965formed 16:45 UTCTraded through at 16:45 UTC
EURUSD, 23 October 2026, 06:00 to 18:00 UTC. Real candles: Dukascopy 15-minute candles, read 2026-10-31. Fair value gap by the three-candle wick rule, no minimum size. Each box runs from its gap until a later candle trades through its far edge, or to the end of the chart.

EURUSD, 23 October 2026. The rule finds 6 gaps in this window, 2 bullish and 4 bearish. The widest gap formed when the candle closing at 07:30 UTC completed, and it is a bearish one. Bearish gaps are the blue boxes.

This window was chosen because it reads clearly. It is not typical, and it says nothing about what the next gap will do.

What traders say about it

Many traders read a bearish gap as a zone price may rise back into before falling again. Others treat it as a sign that sellers were in control during the move. Both are interpretations. A gap does not say that price must return, that a return will hold, or which way price goes next.

Direction depends on how the market is quoted. A chart of the same market quoted the other way round turns every bearish gap into a bullish one, so check which way your chart is quoted.

What the sample counts

In 1,500 session windows of seven pairs and gold, the plain rule found 6,996 bearish gaps. Of the 5,787 with at least 8 candles left in their window, 4,340 of 5,787 (75%) were touched within 120 minutes, and 3,500 of 5,787 (60%) were filled in that time.

These are counts for one sample and one size-free rule. They are not a chance for the next gap and not a result for any trade. The examples page gives the method.

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