FVG (Fair Value Gap)

What it is

A Fair Value Gap, or FVG, is a three-bar pattern in which the middle bar moves so decisively in one direction that the wicks of the first and third bars do not overlap. The result is an untraded vertical price range — a literal gap in the price action that no bar's range crossed. The pattern requires no specific bar size or timeframe; it is purely a geometric relationship between three consecutive bars.

The FVG concept entered popular usage through smart-money-style trading communities, but the geometry itself is timeframe-agnostic and instrument-agnostic. The premise is that a strong impulse leaves an inefficiency behind, and that inefficiency tends to be revisited as price retraces — the market "fills the gap" by trading back through the untouched range.

Why it matters

FVGs offer a clean, mechanical reference for pull-back entries inside a trend. Rather than guessing where price will retrace to, a trader can mark the FVG and wait for price to return to it before re-entering in the direction of the original impulse. Because the rule is geometric and binary, it is easy to backtest, easy to spot in real time, and easy to combine with other context filters like session, structural level, or volume profile location.

Practical uses include:

• Re-entry targets after a strong impulse on the open or after a news pop.
• Confluence checks — an FVG that aligns with a prior HVN or naked POC is higher quality than one in dead space.
• Invalidation rules — a full close beyond the far side of the FVG often invalidates the original impulse thesis.

How it appears on Sierra Chart

Sierra Chart does not ship a dedicated FVG indicator out of the box, but the three-bar geometry is trivial to encode in ACSIL: at each bar, compare the prior bar's high (or low) to the current bar's low (or high) and check for non-overlap. Multiple community studies on the SCS and Sierra Chart forums implement this pattern and draw the resulting boxes directly on the chart, often with auto-removal when price fills the gap.

The same logic can be applied at any timeframe — minute, tick, range, volume bars — and the FVG can be filtered by minimum gap size in ticks to suppress noise on quiet bars.

Common patterns / pitfalls

• FVGs in chop are useless. The pattern needs an impulse context to mean anything; in a tight balance every retrace fills every micro-FVG.
• Not all FVGs get filled. Strong trends leave many gaps that never close — over-reliance on "price always returns" is a common drawdown source.
• Mixing timeframes matters. A 1-minute FVG inside a 1-hour impulse is a tactical re-entry; a 1-hour FVG inside a multi-day trend is a swing reference.
• The first touch of an FVG is statistically more reliable than subsequent touches.

Related SCS studies

FVG detection is typically built as a custom study in ACSIL. The SCS catalog focuses on order flow and structural surfaces — single prints, footprint imbalances, depth — that complement FVG analysis by validating why the original impulse moved with conviction.