Scroll through a dollar-yen chart on any hectic Monday morning, and you will spot places where the price seems to have teleported. Most traders simply label these blank spaces “gaps,” yet over the last few years, another label, Fair Value Gap, or FVG, has entered the conversation.
Both describe untraded price territory, but they are created for different reasons and demand different playbooks. This article breaks down those distinctions and shows you how to use each type of gap to sharpen your Forex strategy.
What Are Traditional Gaps?
Traditional gaps occur when the session closes at one price and the next session opens at a markedly different price, leaving space on the chart. In spot Forex, the boundary is 5 p.m. New York roll-over, so weekend gaps still appear. Textbooks categorise them into breakaway, continuation, and exhaustion varieties, each offering clues about whether the prevailing trend will accelerate or stall.
Another concept closely related to gaps is the FVG in Forex Fair Value Gaps, which represent zones where price has moved so quickly that market participants left untested levels behind, often providing potential areas for future retracements. Conventional wisdom says most gaps and FVGs “fill” sooner or later as price revisits these deserted zones, yet the timing of the fill is notoriously unpredictable. Because the gap is measured from close to open rather than high to low, intraday liquidity sweeps that develop after markets resume are ignored.
The Fair Value Gap Explained
A Fair Value Gap forms inside a continuous session when three consecutive candles create a price imbalance. In an up-move, the middle candle’s low stays above the first candle’s high, leaving a pocket where no transactions occurred; the mirror applies in a down-move. Because every tick inside that zone went untraded, traders view the area as an imbalance that the market wants to repair. Proponents, especially within the ICT methodology, argue that algorithmic order flow deliberately revisits the gap to source liquidity before extending in the original direction. Unlike weekend gaps, an FVG can emerge on a one-minute chart as easily as on a daily, giving both scalpers and swing traders a constant stream of opportunities.
Structural Differences That Matter
Although both gaps show space on a chart, their birthplaces, liquidity profiles, and statistical behaviour diverge enough to require separate rules of engagement.
Origin and Context
Traditional gaps are time-based; trading halts for a weekend or holiday, and the price reopens at a new level shaped by fresh information. The cause is therefore exogenous to intraday microstructure. By contrast, an FVG is order-flow-based; it materialises in real time when aggressive buyers or sellers vacuum up resting liquidity faster than the matching engine can replenish it. The imbalance is endogenous, a footprint of urgency rather than after-hours news. Because of that, many prop desks monitor FVGs alongside volume profile and footprint charts. They view origin context as the first filter.
Liquidity Footprint
When a weekend gap forms, orders sitting inside that void remain untouched, so liquidity is thin if and when the price drifts back to close the gap. That scarcity often leads to whippy fills and larger spreads. An FVG presents the inverse condition; it was born precisely because liquidity was consumed, which means unfilled limit orders are likely resting inside the gap for later execution. As price revisits, those passive orders create a cushion that can spark either a bounce or a continuation, depending on broader trend direction. Knowing which side is favoured helps fine-tune stop placement.
Statistical Frequency
Major pairs exhibit weekend gaps roughly twice a month, and many remain open for weeks. Conversely, a one-hour GBPUSD chart can print several FVGs during a single London session. The abundance of data lets quants back-test FVG fills across thousands of samples, yielding sharper expectancy estimates than traditional gap studies can provide. Still, depth-of-market research shows fill probability varies by pair, volatility regime, and even time of day, so nothing is automatic. Seasonal lulls like August tend to reduce both types of gaps.
Trading Implications
Gap treatment dictates entry logic and risk. Many technicians fill traditional gaps, expecting a quick fill; yet breakaway gaps tied to fundamentals can power lasting trends, so waiting for a confirmation candle is prudent. With FVGs, traders often lay limit orders inside the gap, betting the market will fix the imbalance before resuming course. A bullish play might target the gap midpoint, stop below its low, and aim for the next swing high, routinely achieving 2:1 or better reward-to-risk with minimal slippage. Such clarity is harder to achieve when chasing a runaway weekend gap.
Practical Chart Example
Following a late-April speech by ECB policy makers, EUR/USD accelerated by around 50-60 pips intra-day. On the 15-minute chart, the chartists observed that a bullish Fair Value Gap was created, followed by a decline to the midpoint and then another upturn. The benefit of precise FVG-based entries is that even a disciplined entry at the midpoint of the gap with a tight stop would have yielded a risk-reward ratio of above 2.5:1, which is a large benefit over chasing breakouts.
Final Thoughts
In a marketplace where average daily FX turnover hit $7.5 trillion in 2022, per the BIS Triennial Survey, every edge really counts. Recognising whether a blank space is a classic gap or an FVG lets you align entries with underlying liquidity, instead of guessing at empty pixels.
Read more:
Fair Value Gaps vs. Traditional Gaps: Key Differences and Trading Implications
