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What Is a Fair Value Gap

A fair value gap is a band of prices between three candles: the first candle's high and the third candle's low do not meet, and only the middle candle traded in between. This paper shows you a real 98-pip gap drawn from three March days, the three ranges set side by side, the gap on the daily chart, the middle day opened into the hours that crossed it, and how to draw the band as a filled rectangle on your platform.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Three candles and a space

A fair value gap is a band of prices between three candles. On 3 March 2025 the euro against the dollar reached a high of 1.05037. On 5 March its low was 1.06015. Between those two prices lie 98 pips — a pip being the fourth decimal place, the smallest step most people count in — that only the middle candle, 4 March, passed through. The first candle never got up to them and the third never came down to them. The band is the gap; the name says the price moved through it too fast for much to be traded there.

Three ranges

Set the three days as three ranges, low to high, on one scale, and the gap is a space. The first range ends at 1.05037. The third begins at 1.06015. They do not overlap, and the middle range covers the space between them on its own. Most neighbouring candles overlap the ones either side; when the two outer candles of three leave a space, and only the middle one fills it, the three make a fair value gap.

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