How to trade a fair value gap on XAUUSD

A fair value gap (FVG) is a three-candle pattern where the high of the first candle and the low of the third candle do not overlap, leaving a gap in the middle candle. It marks a fast move that did not give buyers and sellers time to trade across the range.

FVGs are popular in ICT-style frameworks. The premise is that price tends to come back and fill these gaps, and the gap area can act as support or resistance during the retracement. Whether it works any better than ordinary structure is debatable, but it is a useful additional reference for entries.

The rules are mechanical, which is part of why traders like the concept.

• Three consecutive candles where candle 1 and candle 3 do not overlap
• Bullish FVG: candle 1 high < candle 3 low — gap is between them
• Bearish FVG: candle 1 low > candle 3 high
• Gap should sit inside an impulsive move, not random chop
• Larger gaps relative to ATR are more meaningful than tiny ones

Limit order at the edge of the gap (the side price approaches from) is the most common entry. Some traders wait for confirmation inside the gap — a rejection candle or a break of a lower-timeframe structure — before entering.

Stop goes beyond the opposite edge of the gap, with a small buffer. Target is the next structural level or the origin of the impulse that created the gap. Many ICT-style traders pair the FVG with an order block for confluence.

FVGs are easy to find, which is also why they are easy to over-trade.

• Not every gap fills — strong trends leave gaps that never get revisited
• Multiple overlapping FVGs on lower timeframes lead to bias confirmation, not analysis
• Trader uses the FVG as a thesis instead of waiting for price reaction
• FVG inside chop is just normal noise — needs an impulse to be meaningful

Mark every FVG you see at a starting bar in XAUUSD replay, then step forward and see how many fill, how many partially fill, and how many never get touched. The base rates will surprise you.

Pair the drill with a structure-based filter — only trade FVGs inside a clear trend, or only at higher-timeframe levels. Compare the filtered results to the unfiltered ones across thirty or fifty examples.