A three-candle imbalance where the wicks of the first and third candles do not overlap, leaving a gap around a large middle candle. Price often returns to rebalance it.
How to identify it
- Large displacement candle in the middle
- Candle 1 high and candle 3 low leave an unfilled gap (bullish case)
- Gap remains open until price revisits
Entry
Enter on a return into the gap, often at its midpoint (consequent encroachment).
Stop loss
Beyond the far side of the gap or the origin of the displacement.
Target
The swing high/low that the displacement created, or the next liquidity pool.
Invalidation
Price closes fully through the gap.
Does it work for you?
Textbook reliability means little until you know your own numbers. Tag your fair value gap (fvg) trades in TradeZento and it shows your win rate, average win and loss, and P&L per trade for this pattern, so you know whether to keep it in your playbook.