Using Three-Candle Fair Value Gaps in Smart Money Concepts

Summary

The article introduces fair value gaps (FVGs) through patterns of three consecutive candlesticks. It calls the pattern balanced when the third candle’s range overlaps the ranges of the first two, and unbalanced when the third candle leaves a gap relative to the first. A gap above the first candle’s high is described as bullish; a gap below its low is described as bearish. The author presents these gaps as visible traces of large institutional activity and as a foundational concept in Smart Money Concepts (SMC).

The practical suggestion is to inspect a chart for FVGs as a first step in reading price action. However, the article does not define entry, exit, or risk rules, and explicitly leaves open whether traders should enter when a gap forms or use it to investigate an earlier move. It offers illustrative pattern descriptions rather than empirical evidence that gaps identify institutional orders or provide a profitable signal. The claims about who causes price movements are asserted, not demonstrated.

Key ideas

• An FVG is defined using the ranges of the first and third candles in a sequence of three.
• A gap above the first candle is labeled bullish, while a gap below it is labeled bearish.
• The article treats FVGs as a core chart concept within Smart Money Concepts.
• It proposes locating gaps as an initial price-action analysis step.
• The article provides no tested entry, exit, or risk-management rules and no performance evidence.

Tags

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