EXPLAINED: A Bullish Fair Value Gap (FVG) - Smart Money Concepts

3 Apr 2023

A Bullish Fair Value Gap is a 3 candle structure with an up impulse candle (2nd) that indicates and creates an
imbalance or an inefficiency in the market.

WHAT DO THE IMBALANCES TELL US?

These imbalances tell us that the buying and selling is not equal. Now the market needs to rebalance (move at least to 50% of the fair value gap to fill) to make up for the imbalance and rebalance. For this to happen we need to see orders filled in the prices of the candle with the FVG.

HOW A BULLISH FAIR VALUE GAP IS CONSTRUCTED:

1st Candle
Draw a horizontal line from the top of the wick.

3rd Candle
Draw a horizontal line from the bottom of the wick

2nd Candle
Draw a BOX between the above and below and pull it over to see the FVG range.


BETWEEN CANDLE 1 and CANDLE 3:

Do NOT show common prices. They do NOT touch where the upper & the lower wicks do NOT overlap.

With a Bullish FVG we can expect the market price to move DOWN.

HOW MUCH?

I believe a Bullish FVG needs to close at least 50%.
So you can drag a Gann Box or a Fib retracement (take out all the other levels except 50%).

Wait for the price to close and fill the prices and boom - Your Bullish Fair Value Gap has been filled.

Let me know if you have any other SMC (Smart Money Concepts) Questions.