Fair Value Gap Calculator
Quickly compute fair value gap with accurate formulas. See amortization schedules, growth projections, and side-by-side comparisons.
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Formula
A Fair Value Gap forms when candle 2 creates an impulse move that leaves a gap between candle 1 and candle 3 wicks. For a bullish FVG, the gap exists between candle 1's high and candle 3's low. For a bearish FVG, between candle 1's low and candle 3's high. The Consequent Encroachment (CE) is the exact midpoint of this gap.
Last reviewed: December 2025
Worked Examples
Example 1: Bullish FVG on EUR/USD
Example 2: Bearish FVG on GBP/USD
Background & Theory
The Fair Value Gap Calculator applies the following established principles and formulas. Foreign exchange markets facilitate the conversion of one currency into another and serve as the largest and most liquid financial markets in the world, with daily turnover exceeding seven trillion US dollars. Exchange rates are quoted as currency pairs, expressing the price of one unit of a base currency in terms of a quote currency. For example, a EUR/USD rate of 1.0850 means one euro buys 1.0850 US dollars. The smallest standardized price movement in most pairs is the pip, typically the fourth decimal place, with a value of 0.0001 per unit for USD-denominated pairs. The bid price is the rate at which a dealer will buy the base currency, while the ask price is the rate at which it will sell. The spread between bid and ask represents the dealer's compensation and varies with liquidity and volatility. Leverage amplifies both gains and losses by allowing traders to control positions larger than their deposited margin. A 100:1 leverage ratio means a one-percent adverse move eliminates the entire margin, making position sizing and risk management critical. Two parity conditions from international economics anchor exchange rate theory. Purchasing Power Parity (PPP) holds that exchange rates should adjust over time so that identical goods trade at equivalent prices across countries: S = P_d / P_f, where S is the spot rate and P_d and P_f are domestic and foreign price levels. PPP performs well over long horizons but poorly in the short run due to trade barriers, non-tradable goods, and capital flows. Covered Interest Rate Parity (CIRP) is a near-arbitrage condition stating that forward exchange rate premiums or discounts exactly offset interest rate differentials between two currencies: F/S = (1 + r_d) / (1 + r_f). Deviations from CIRP create riskless arbitrage opportunities that traders rapidly eliminate. Uncovered Interest Rate Parity posits that high-yielding currencies should depreciate to offset their interest advantage, though empirical evidence is mixed and the carry trade — borrowing in low-rate currencies to invest in high-rate ones — has generated persistent returns.
History
The history behind the Fair Value Gap Calculator traces back through the following developments. For much of the nineteenth century and early twentieth century, the international monetary system operated under the classical gold standard, under which each participating currency was fixed to a defined weight of gold, making bilateral exchange rates effectively constant. The system provided price stability and facilitated global trade but constrained governments' ability to respond to economic downturns. World War One shattered the gold standard as nations suspended convertibility to finance wartime expenditures. The interwar period saw attempts to restore gold convertibility, most notably the British return to the gold standard in 1925 at the pre-war parity, a decision criticized by John Maynard Keynes as deflationary. The Great Depression forced widespread currency devaluations and the effective collapse of the international gold standard by the early 1930s. The Bretton Woods Conference of July 1944 established a new order in which member currencies were pegged to the US dollar, while the dollar alone was convertible into gold at 35 dollars per troy ounce. The International Monetary Fund and World Bank were created at the same conference to oversee the system. Bretton Woods delivered exchange rate stability during the postwar growth era but came under strain as US deficits and European dollar accumulation outpaced American gold reserves. On August 15, 1971, President Nixon announced the suspension of dollar-gold convertibility — the so-called Nixon Shock — effectively ending the Bretton Woods system. By 1973, major currencies had transitioned to floating exchange rates determined by market supply and demand, a regime that has persisted. On September 16, 1992, hedge fund manager George Soros shorted the British pound against the European Exchange Rate Mechanism constraints, forcing the UK's withdrawal in what became known as Black Wednesday. Electronic trading platforms emerged in the 1990s and 2000s, replacing voice-brokered interbank markets and dramatically reducing transaction costs for institutional and retail participants alike.
Frequently Asked Questions
Formula
Bullish FVG: Gap = Candle 3 Low − Candle 1 High | Bearish FVG: Gap = Candle 1 Low − Candle 3 High | CE = (Top + Bottom) / 2
A Fair Value Gap forms when candle 2 creates an impulse move that leaves a gap between candle 1 and candle 3 wicks. For a bullish FVG, the gap exists between candle 1's high and candle 3's low. For a bearish FVG, between candle 1's low and candle 3's high. The Consequent Encroachment (CE) is the exact midpoint of this gap.
Worked Examples
Example 1: Bullish FVG on EUR/USD
Problem: Candle 1 high: 1.0920, Candle 3 low: 1.0935. Identify the FVG range and CE level.
Solution: FVG Top = Candle 3 Low = 1.0935\nFVG Bottom = Candle 1 High = 1.0920\nFVG Size = 1.0935 - 1.0920 = 0.0015 = 15 pips\nCE (Midpoint) = (1.0935 + 1.0920) / 2 = 1.09275
Result: Bullish FVG: 1.0920–1.0935 | CE: 1.09275 | 15 pips
Example 2: Bearish FVG on GBP/USD
Problem: Candle 1 low: 1.2650, Candle 3 high: 1.2630. Identify the FVG and entry level.
Solution: FVG Top = Candle 1 Low = 1.2650\nFVG Bottom = Candle 3 High = 1.2630\nFVG Size = 1.2650 - 1.2630 = 0.0020 = 20 pips\nCE (Midpoint) = (1.2650 + 1.2630) / 2 = 1.2640
Result: Bearish FVG: 1.2630–1.2650 | CE: 1.2640 | 20 pips
Frequently Asked Questions
What is a Fair Value Gap (FVG) in ICT trading?
A Fair Value Gap (FVG) is a three-candle price pattern identified in the Inner Circle Trader (ICT) methodology. It represents an imbalance in price where a strong impulse candle creates a gap between the wicks of the candles on either side of it. Specifically, a bullish FVG forms when candle 3's low is higher than candle 1's high, leaving an unfilled space. Price tends to return to these gaps to rebalance, making them key areas for trade entries. FVGs are visible on all timeframes and are used by smart money concept traders to identify institutional order flow and potential reversal zones.
How do you trade a bullish Fair Value Gap?
To trade a bullish FVG, first identify a three-candle pattern where a strong up candle (candle 2) creates a gap between candle 1's high and candle 3's low. Wait for price to retrace back down into the FVG zone. Place a buy limit order at the FVG bottom or at the CE (midpoint) for a more precise entry. Your stop loss should go below the FVG low or below candle 2's low for added protection. Target previous highs, opposing FVGs, or liquidity pools above the market. Always confirm with higher timeframe bias and look for FVGs that align with the overall market structure and order flow direction.
What is the difference between a Fair Value Gap and a regular gap?
A traditional gap occurs when the market opens at a different price than the previous close, typically over weekends or after major news events. A Fair Value Gap, however, occurs intraday within continuous price action and is defined by the relationship between three consecutive candles. Regular gaps are visible as empty spaces on the chart, while FVGs may not be immediately obvious because candle 2's body and wicks fill the visual space. FVGs represent institutional imbalance and inefficiency in price delivery, whereas regular gaps can be caused by various factors including low liquidity periods. Both tend to get filled, but FVGs are specifically tied to smart money concepts and algorithmic trading behavior.
Do Fair Value Gaps always get filled?
Not all Fair Value Gaps get filled, but the majority do eventually see price return to them. In ICT methodology, FVGs on higher timeframes (4-hour, daily, weekly) are more significant and more likely to act as magnets for price. FVGs that form during high-impact news events or during killzone times tend to be more reliable. Some FVGs get partially filled (to the CE level) while others get completely filled and even exceeded. The key is to use FVGs in confluence with other ICT concepts like order blocks, liquidity levels, and market structure. A strong trend may leave several unfilled FVGs as price continues in one direction before eventually retracing.
Is my data stored or sent to a server?
No. All calculations run entirely in your browser using JavaScript. No data you enter is ever transmitted to any server or stored anywhere. Your inputs remain completely private.
Why might my result differ from another tool or reference?
Differences typically arise from rounding conventions, the specific version of a formula (for example, simple vs compound interest), or unit inconsistencies between inputs. Check that both tools are using the same formula variant and the same units. The References section links to the authoritative source behind the formula used here.
References
Reviewed by Daniel Agrici, Founder & Lead Developer · Editorial policy