Glossary
Fair Value Gap
A fair value gap refers to a price imbalance on a chart where little to no trading occurred, often between a rapid move up or down. In technical analysis, it signals a potential area where the market may return to "fill" the gap, aligning price with perceived fair value.
How does a fair value gap form?
It typically forms during high-volatility moves, such as after news releases or large institutional trades, where price jumps without executing orders in the skipped range.
Why do traders care about fair value gaps?
These gaps are often revisited, as the market may return to fill unexecuted orders or rebalance price around fair value—creating potential trading opportunities.
Are fair value gaps the same as price gaps?
Not exactly. While both refer to missing price areas on charts, fair value gaps focus on institutional order imbalance and are often used in advanced technical strategies.
Do fair value gaps always get filled?
Not always, but many traders believe gaps are likely to be revisited, especially in liquid markets. Timing and context are key.
How do traders use fair value gaps?
They may identify gaps as support/resistance zones, plan entries on retracements, or combine them with other indicators to refine entries and exits.
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