On Monday morning, scroll through a dollar-unin chart on any busyness, and you will present the places where the price is teleported. Most traders only labeled these empty locations “gap”, yet in the last few years, another label, fair price difference, or FVG, has entered the conversation.
Both describe uncontrolled value area, but they are made for different reasons and demand different playbooks. This article breaks those distinctions and shows you how to use each type of difference to intensify your foreign exchange strategy.
What are traditional intervals?
The traditional interval occurs when the session closes at a price and the next session opens at a different price, which leaves the place on the chart. In Spot Forex, Seema is a New York Roll-Over at 5 pm, so weekend gaps still appear. Textbooks classify them into varieties of break -ou, continuity and tiredness, offering clues about each whether the prevailing trend will accelerate or stall.
Another concept related to gaps is FVG at reasonable value interval, which represents areas where the price has moved so quickly that market participants left behind unused levels, often offer potential areas for future retracement. Traditional knowledge states that most gaps and FVGs “fill” soon or later because the value reflects these uninhabited areas again, yet the time of filling is notorious. Because the difference is measured from the open from the open rather than the lower, the intraday liquidity sweep that develop after the market resumes, ignore.
Reasonable price difference was explained
A fair price interval is formed inside a continuous session when three frequent candles create a price imbalance. In an up-au, the middle candle remains less than the high of the candle, leaving a pocket where no transactions occur; The mirror is applied to a down-a-mouth. Because every tick inside the zone became unaffected, traders see the area as an imbalance that the market wants to repair. Supporters, especially within the ICT functioning, argue that the algorithm order flows intentionally reflects the difference to the source liquidity before expanding in the original direction. Unlike weekend intervals, an FVG can emerge as a daily as a daily on a chart of one-minute, giving both scalars and swing traders a constant stream of opportunities.
Structural differences that matter
Although both gaps show location on a chart, their birthplace, liquidity profiles, and statistical behavior engagement have enough deviations to require different rules of engagement.
Original and reference
Traditional intervals are time-based; Trading stops for a weekend or holiday, and the price reopens at a new level of fresh information size. Therefore, the reason is outdoor for intraday microstructure. In contrast, an FVG is an order-flow-based; It is physical in real time when aggressive buyers or sellers can vacuum to relax rapid liquidity than matching engines. The imbalance is endogenous, a footprint of urgency rather than the news of hours. Because of that, many prop Desk monitor FVGS with volume profiles and footprint charts. They see the original reference as the first filter.
Liquidity footprint
When a weekend gap is formed, the orders sitting inside that void remain untouched, so the liquidity is thin if and when the price comes back to stop the difference. The deficiency often causes whippey to spread and big. An FVG presents the reverse position; It was born properly because liquidity was consumed, which means that the unfolded limit orders are probably resting within intervals for later execution. As the value repeats, they make passive orders a cushion that can either bounce or spark a continuity based on a broader trend direction. Knowing which side is favored helps in fine-tune stop placement.
Statistical frequency
Major couples demonstrate a weekend interval twice a month, and remain open for several weeks. In contrast, one hour GBPUSD chart can print several FVGS during a single London session. The abundance of data allows the quantity to fill the quints in thousands of samples, meets faster expectations compared to traditional gap studies. Nevertheless, depth market research suggests that the pair, instability governance and also from daytime, so nothing is automated. Seasonal Lulls, such as August, reduce both types of gaps.
Business implication
The gap treatment determines the entry argument and risk. Many technicians fill traditional intervals, expecting a quick filling; Nevertheless, break -up gaps associated with basic things can strengthen permanent trends, so a confirmation is prudent waiting for the candle. With FVGS, traders often order within intervals, the market will fix the imbalance before resuming the course from betting in the market. A bullish play gap can target the midpoint, stop it at least below, and the next swing can aim to high, regularly get 2: 1 or better reward-to-riches with minimal slipage. It is difficult to achieve such clarity when chasing a fugitive weekend interval.
Practical chart example
After a late April speech by ECB policy makers, EUR/USD was intensified by about 50–60 pips intra-day. On the 15 -minute chart, the chartists noticed that a rapidly fair price difference was created, followed by a decline in midpoint and then another uptar. The advantage of accurate FVG-based entries is that even a disciplined entry at the middle point of the difference with a tight stop would have obtained a risk-pro ratio above 2.5: 1, which is a major advantage when chasing the breakout.
final thoughts
In a market where the average daily FX Turnover hit $ 7.5 trillion in 2022, according to the BIS Triangle Survey, every edge actually matters. Identifying whether an empty space is a classic difference or a FVG lets you align the entries with the underlying liquidity rather than estimating on an empty pixel.
