A smarter way to read price action and predict reversals
Fair Value Gaps (FVGs) are one of the core tools used in Smart Money Concepts (SMC) trading strategies. These gaps represent price inefficiencies left behind when the market moves too aggressively in one direction, often without balancing buyer and seller orders.
Smart money traders — those aiming to mimic institutional behavior — often watch these zones closely as likely areas for price retracement or reversal.
📊 What Is a Fair Value Gap?
A Fair Value Gap (or imbalance) occurs when there’s a gap between the first and third candles’ wicks, with a large second candle breaking structure. This suggests price moved too quickly and may return to “fill” the imbalance where orders were left behind.
FVGs often:
- Act as magnetic zones for price to revisit
- Align with liquidity sweeps or order blocks
- Offer high-R/R trade entries when used with confluence
💡 Why FVGs Matter in Smart Money Trading
Smart money traders don’t chase indicators — they read the story price is telling. FVGs are part of that narrative. They show:
- Where inefficiencies exist in market structure
- Zones where institutions may have pending orders
- Areas likely to be targeted before major moves
When paired with other SMC tools like:
- Market structure shifts
- Liquidity grabs
- Premium/discount zones
...FVGs become a sniper’s tool for precision entries.
🔍 Spotting FVGs Automatically
If you trade on TradingView, you can use my free script — the Imbalance Finder — to spot these zones in real time.
The script:
- Highlights imbalances using 3-candle logic
- Draws boxes for visual structure
- Shows if price is actively filling a gap (solid → dashed)
It’s lightweight, customizable, and designed to help you trade smarter — not harder.
📈 Example FVG Strategy
Here’s a basic strategy using FVGs and market structure:
- Identify a recent break of structure (BOS)
- Look for an FVG below (in an uptrend) or above (in a downtrend)
- Wait for price to return to the FVG zone
- Enter on confirmation (e.g. bullish engulfing, lower-timeframe BOS)
- Stop loss below the FVG or structure low
- Target previous swing high or next liquidity pool
🚀 Take It Further
I’m currently building a Pro version of the indicator with:
- Multi-timeframe FVG detection
- Alerts when price enters or exits a zone
- FVG grouping for cleaner charts
- Full/partial fill tracking
If you're a trader who wants cleaner charts, better setups, and more confidence, this tool will be for you.
Want Early Access or Updates?
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Trade smart,
– PatrickWS
