Fair value gap glossary

Gap ideas

• Imbalance: Imbalance is a trader's word for a stretch of price where one side moved the market and the other side barely traded.
• Displacement: Displacement is a strong, fast move in one direction, usually a large candle body, that leaves little overlap with the candles around it.
• Consequent encroachment: Consequent encroachment is the midpoint of a fair value gap, the price halfway between its top and bottom edge.
• Inefficiency: Inefficiency is another trader's name for a price range crossed quickly, with little trading at those prices.
• Volume imbalance: A volume imbalance is a gap between the bodies of two neighbouring candles, where their wicks still overlap.
• Rebalancing: Rebalancing is a trader's word for price returning into a gap it left behind.
• Stacked fair value gaps: Stacked fair value gaps are two or more gaps of the same direction that form one after another in a single move.
• Wick rule: The wick rule finds a fair value gap by comparing the wicks of the first and third candle: a gap exists when they do not overlap.
• Body rule: The body rule finds a gap by comparing candle bodies instead of wicks, so it marks a different range from the wick rule.
• Minimum size filter: A minimum size filter ignores gaps smaller than a chosen size, so only wider gaps are marked.
• Three-candle pattern: The three-candle pattern is a first candle, a moving middle candle and a third candle whose wick leaves a gap from the first.
• Middle candle: The middle candle is the second of the three candles in a fair value gap, the one that moves away from the first candle faster than the third lets price come back.
• First and third candle: The first and third candles of a fair value gap are the two candles whose ranges fail to overlap, with the middle candle between them.

Gap states and measures

• Open gap: An open gap is a fair value gap that price has not traded back into since it formed.
• Touched gap: A touched gap is a fair value gap that price has traded into but not through, so part of it is still untraded.
• Filled gap: A filled gap is a fair value gap that price has traded all the way through, touching or passing its far edge.
• Gap fill: A gap fill is price trading back through a gap until the whole range has traded.
• Remaining to fill: Remaining to fill is the part of a gap that price has not yet traded into, measured in pips or as a share of the gap.
• Gap size: Gap size is the distance from the top of a fair value gap to its bottom, in price or in pips.
• Gap edges: The edges of a fair value gap are its top and bottom prices, the two wicks that bound it.
• Gap age: Gap age is how long a fair value gap has existed, counted in candles from the candle that completed it to the point being looked at.
• Time to fill: Time to fill is how long a gap took to be filled, measured from the candle that formed it to the candle that filled it.
• Partial fill: A partial fill is when price trades back into a gap but does not reach its far edge, so part of the gap is left untraded.

Candles and prices

• Candlestick: A candlestick shows the open, high, low and close of one period of trading as a body and two wicks.
• OHLC: OHLC is open, high, low and close: the four prices that describe one candle.
• Candle body: The body of a candle is the range between its opening price and its closing price.
• Candle wick: A wick is the thin line above or below a candle's body that marks the highest or lowest price traded in that period.
• Bullish candle: A bullish candle closes higher than it opened.
• Bearish candle: A bearish candle closes lower than it opened.
• Candle close: The candle close is the moment a candle's period ends and its closing price is final.
• Pip: A pip is the standard small unit of price movement in currency trading.
• Pip size: Pip size is the price distance one pip stands for on an instrument.
• Average range: Average range is the typical distance between the high and low of a candle on an instrument, averaged over a stretch of candles.
• Swing high: A swing high is a candle whose high is above the highs of the candles on either side of it, so price turned down from that point.
• Swing low: A swing low is a candle whose low is below the lows of the candles on either side of it, so price turned up from that point.
• Impulse candle: An impulse candle is a candle with a large body in one direction and small wicks, the kind of candle that often forms the middle of a gap.
• Candle range: The range of a candle is the distance from its high to its low, wicks included.
• Daily candle: A daily candle is one candle that covers a whole trading day, with the open, high, low and close of that day.
• Tick: A tick is one change in the quoted price, and a candle is built from all the ticks inside its time period.
• Spread: The spread is the difference between the price a broker will buy at and the price it will sell at, the cost built into every quote.
• Slippage: Slippage is the difference between the price a trader asked for and the price the order filled at.

Sessions and time

• Timeframe: A timeframe is the length of time one candle covers: five minutes, one hour, one day.
• Higher timeframe: A higher timeframe is a longer candle length than the one being looked at, such as the hour above a 15-minute chart.
• Trading session: A trading session is a part of the day when the market of one region is open and most active.
• Asian session: The Asian session is the window from 22:00 to 07:00 UTC, when Tokyo, Sydney and the other Asian markets lead the trading.
• London session: The London session is the window from 07:00 to 12:00 UTC, when London is open and the Asian session has ended.
• New York session: The New York session is the window from 16:00 to 22:00 UTC, after the London and New York overlap has ended.
• Session overlap: The session overlap is the window from 12:00 to 16:00 UTC, when London and New York are both open.
• Intraday chart: An intraday chart is a chart whose candles each cover less than a day, such as 1-minute, 15-minute or hourly candles.

Classical gaps

• Price gap: A price gap is a space on a chart where no trading took place, because one period opened away from where the last one closed.
• Weekend gap: A weekend gap is a price gap between Friday's close and the next opening, because the market is shut in between.
• Runaway gap: A runaway gap is a price gap in the middle of a strong trend, in the direction of that trend.
• Exhaustion gap: An exhaustion gap is a price gap near the end of a trend, followed by price turning back.
• Gap up: A gap up is a price gap where a market opens above the previous close or the previous high, leaving empty space on the chart below the open.
• Gap down: A gap down is a price gap where a market opens below the previous close or the previous low, leaving empty space on the chart above the open.

How this site counts

• Sample window: A sample window is the stretch of candles the site reads when it counts gaps: 06:00 to 18:00 UTC on one day for one instrument.
• Look-ahead window: A look-ahead window is the stretch of candles after a gap that is watched to see whether price returned to it.
• Touch: A touch is a later candle whose wick reaches into a gap.
• Retest: A retest is price returning to a level or zone it left earlier.
• Sample size: Sample size is the number of gaps or candles a figure was counted from, and it limits how much the figure can say.

Words defined on other sites

Words for liquidity, order blocks, market structure and the like belong to other subjects and are not defined here. This site defines only the words its own pages use. The definitions here follow the methodology.