How traders use a fair value gap
A gap is a zone to watch, not a trade on its own. This page sets out the ideas traders describe, in the order they usually come up, and the risks that go with each.
Educational content, not advice. This site has not tested these ideas as a system and claims no result for any of them. Trading carries a risk of loss, and you can lose more than you expect.
1. Start with the chart around the gap
The same three candles mean different things in a strong trend, in a range and just after news. Many traders look at a higher timeframe first and note which way it is moving. They then prefer gaps in the same direction, or treat a gap against the trend with more caution. How price broke earlier highs and lows, covered under market structure, is part of that picture.
2. Mark few gaps
- 1Bearish157.432 to 157.547formed 08:30 UTCTraded through at 16:30 UTC
- 2Bearish157.345 to 157.415formed 08:45 UTCTraded through at 09:15 UTC
- 3Bearish157.216 to 157.244formed 11:15 UTCTraded through at 12:30 UTC
- 4Bearish157.187 to 157.196formed 11:30 UTCTraded through at 12:30 UTC
- 5Bullish157.111 to 157.144formed 13:00 UTCTraded through at 13:45 UTC
- 6Bullish157.276 to 157.352formed 16:15 UTCNot revisited by 18:00 UTC
USDJPY, 30 October 2026: the plain rule marks 6 gaps in 12 hours. A median window has 9. A chart with every box on it shows nothing, so traders add filters: a minimum size, a large middle candle, a higher timeframe, or only the gaps near an important level. Each filter is a choice, and educators choose differently.
3. Decide what a return would have to show
Traders usually wait for price to come back into the gap and then look for a reaction. Some use the edge of the box, some use its midpoint. Some wait for a smaller timeframe to show a turn before they act. A return that goes straight through the box is a failed reading, and an inversion idea starts there.
Price often does not come back. In the sample behind this site, of 11,764 size-free gaps with at least two hours of candles after them, 8,872 of 11,764 (75%) were touched within two hours. The rest were not, in that time. That is a count of what happened to every gap the rule found, including tiny ones. It says nothing about whether acting on any of them pays.
4. Know where you are wrong before you enter
- A common stop idea is beyond the far side of the gap, or beyond the first candle's extreme. A tighter stop is hit more often. A wider one risks more per trade.
- A common target idea is the next obvious high or low. A target that is far away needs a stop that fits it.
- Size the position from the stop, so a loss is an amount you chose in advance. Many traders risk a small fixed share of their account on one idea.
- Costs matter. Spreads and slippage are large next to a small gap.
5. A checklist to write before any trade
- Which timeframe is the gap on, and which way is the larger move?
- What rule found it, and would a stricter rule keep it?
- What would you need to see on a return to act?
- Where is the stop, and what is the loss if it is hit?
- What happens if price never returns, or returns and goes straight through?
The questions are worth answering on a demo account first.
Where to go next
If you want the rule drawn on your own charts, see the fvg indicator site. A planned alert feed from this site is described on the cheat sheet page, with its status.