How a fair value gap forms
Look at three candles in a row. In a bullish fair value gap, the high of candle 1 is below the low of candle 3. Candle 2 was a big push up, and nothing traded in the space between those two wicks. A bearish one is the mirror: the low of candle 1 is above the high of candle 3.
Example numbers, not a real trade
How traders use it
- As a spot where a pullback might find buyers (bullish gap) or sellers (bearish gap).
- As a target: some expect price to come back and “fill” the zone.
- On any time frame, though bigger time frames carry more weight.
Does Trade Ideas scan for fair value gaps?
No. We checked our alert and filter list, and none of them finds the three-candle fair value gap, so this page is a learning guide only. What we do have is related but different: opening gaps. A stock that opens above or below yesterday’s close has an opening gap, and that one we track live.
- Gap Up Reversal and Gap Down Reversal fire when an opening gap fills back through yesterday’s close.
- The gap fill scanner and the gap scanner show those moves across the market.
Don’t mix the two up: an opening gap is between days, a fair value gap is inside the bars.
Questions
What is a fair value gap?
A three-candle pattern where the middle candle moved so fast that the wicks of the candles on either side don’t overlap, leaving an untraded zone.
Do fair value gaps get filled?
Some do and many don’t. Treat it as a level to watch, not a prediction.
Is a fair value gap the same as a gap fill?
No. A gap fill is about the opening gap versus yesterday’s close. A fair value gap is inside the bars on the chart.
Does Trade Ideas alert on fair value gaps?
No. Trade Ideas has opening-gap alerts like Gap Up Reversal and Gap Down Reversal, but no fair value gap alert.