How an FVG is identified
In a simple bullish example, the high of the first candle is below the low of the third candle, leaving a zone with limited overlap around the middle displacement candle. Bearish FVGs are the inverse.
What it can represent
An imbalance can show that price moved quickly because one side of the market was temporarily dominant. Traders sometimes watch these areas for later reactions or partial retracement.
What makes one more meaningful
- Strong displacement.
- Alignment with structure or a fresh breakout.
- Location near a meaningful higher-timeframe zone.
- Confluence with liquidity or session timing.
Limitations
Not every gap fills. Some are ignored completely, and some are crossed multiple times. Treat FVGs as one piece of evidence rather than a standalone entry rule.