Fair Value Gaps in Three-Candle Smart Money Analysis

Summary

The document defines a fair value gap as a price imbalance across a three-candle pattern, within the framework of ICT-style smart money concepts. For a bullish pattern, it identifies a gap of at least one point between the first candle’s high and the third candle’s low. For a bearish pattern, it uses the first candle’s low and the third candle’s high.

The note also says the indicator’s colors can be adjusted in its settings. It does not explain how to trade these gaps, whether price tends to revisit them, what market or timeframe the definition assumes, or how the pattern performs in historical testing. The description is therefore a compact indicator definition rather than evidence for a standalone strategy.

Key ideas

• A fair value gap is defined using price levels from the first and third candles in a three-candle sequence.
• The bullish condition compares the first candle’s high with the third candle’s low.
• The bearish condition compares the first candle’s low with the third candle’s high.
• The stated minimum gap is one point.
• The document gives no trading rules or performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.