Trade with Precision After the Pullback β Not During the Chaos
π Introduction: Why Fair Value Gaps Signal High-Probability Trend Continuations
In modern trading, understanding where price is likely to return before continuing is a skill that separates professionals from the rest. One of the most effective tools for this is the Fair Value Gap (FVG) β a clean imbalance between buyers and sellers that price often returns to before launching the next move.
While many traders use FVGs to catch reversals, this strategy focuses on using them to catch continuation setups:
β’ After a strong move creates an FVG
β’ Price retraces into the gap
β’ Volume stalls or confirms
β’ Then resumes in the direction of the trend with precision
This is where the Fair Value Gap Continuation Strategy shines β combining market structure, momentum, and clean entry logic with tight stops and scalable targets. It works across all markets and timeframes, especially well in trending conditions, post-news impulses, and breakout pullbacks.
π What Is a Fair Value Gap and Why It Works
A Fair Value Gap (FVG) is a price imbalance that occurs when one side of the market dominates, creating a zone where no trade occurred on the other side. In simple terms: itβs a clean, unfilled pocket left behind during a strong move.
π How FVGs Are Formed
An FVG typically forms over three consecutive candles:
β’ Candle 1: Initial move
β’ Candle 2: Aggressive expansion with a gap between its body and the wick of candle 1
β’ Candle 3: Continuation in the same direction
The gap between Candle 1βs wick and Candle 2βs wick is the FVG β an area price often comes back to fill before continuing.
π― Why FVGs Are Powerful
β’ They reveal aggressive buyer or seller intent
β’ Institutions often leave these gaps behind as they build positions in waves
β’ Price frequently returns to the gap to fill remaining orders before resuming the trend
Think of an FVG as a magnet + launchpad β price gets pulled into it, stabilizes, and then explodes back in the direction of the initial move.
π― How to Identify High-Probability FVG Continuation Setups
Not all fair value gaps lead to profitable trades. To use the FVG Continuation Strategy effectively, you need to filter for clean, momentum-backed imbalances in the right market conditions. Hereβs how to do it:
β 1. Start with a Strong Impulsive Move
Look for a clear, directional push β either bullish or bearish β with:
β’ Large, full-bodied candles
β’ Elevated volume or energy (momentum spike)
β’ Breakout from structure (e.g., range, resistance, or news-based move)
This shows that one side (buyers or sellers) is fully in control.
β 2. Identify the FVG Zone
Once the move is underway, look for:
β’ A 3-candle pattern where the middle candle leaves a gap between:
o Its low and the high of the first candle (in an uptrend), or
o Its high and the low of the first candle (in a downtrend)
Mark this as your Fair Value Gap zone β the area price is likely to return to.
β 3. Watch for Price to Retrace into the Gap
Price often returns to this zone shortly after the move β either:
β’ Immediately (within a few candles), or
β’ After forming a small consolidation or pullback
Wait for price to enter the FVG, not just touch it. Ideally, it should pause or wick inside it.
β 4. Confirm the Reaction Before Entry
Confirmation is key. Look for:
β’ Wick rejection or stall candle inside the FVG
β’ Volume drop-off during the pullback
β’ Momentum indicator (e.g., RSI, Energie) starting to flip or bounce
This confirms the gap is being respected, not broken.
π How to Trade the FVG Continuation Setup (Step-by-Step)
Once youβve identified a valid FVG and see price pulling back into it, the next step is to execute with precision. This strategy provides clear entries, tight stops, and high R:R potential β perfect for both intraday and swing trading
β Step 1: Mark the FVG Zone
Use a rectangle to highlight the gap between Candle 1βs wick and Candle 3βs wick (created by Candle 2βs imbalance). This zone becomes your entry area.
β Step 2: Wait for Price to Retrace Into the FVG
Allow price to naturally pull back into the FVG. Donβt anticipate the move β wait for a clean return into the gap.
π‘ Stronger setups occur when price reaches the midpoint of the FVG and shows hesitation.
β Step 3: Watch for Reaction and Confirmation
Before entering, look for evidence that the market is respecting the imbalance:
β’ A rejection wick, doji, or stall candle inside the FVG
β’ Volume dropping during the pullback
β’ A momentum shift β for example, price slowing down while trend indicators or oscillators flatten or reverse direction
This helps confirm that the pullback is fading and the trend is resuming.
β Step 4: Enter the Trade
β’ Entry: On the candle that confirms the rejection (e.g., break of a rejection candleβs high in an uptrend)
β’ Stop-Loss: Just below the FVG (for longs) or just above it (for shorts)
β’ Take-Profit Options:
o TP1: Return to the previous swing high/low
o TP2: Measured move based on the impulse leg
o TP3: Use 1.5Γβ2Γ ATR for volatility-aligned targets
π Example Setup (Bullish):
β’ Price surges from 4320 to 4348, forming a fair value gap from 4332.0 to 4335.5
β’ Price pulls back into the zone, wicks at 4333.0
β’ Entry: Long at 4334.0
β’ Stop: 4331.5
β’ TP1: 4348.0
β’ TP2: 4355.0
β
Result: 2.5-point risk for 14+ point reward = 5.6R trade
π Backtest Examples: FVG Continuations in Action
These real-world backtests show how the Fair Value Gap Continuation Strategy performs across different markets, sessions, and conditions. The key is momentum + structure + clean pullback into imbalance.
π’ Example #1: Bullish Continuation After Breakout
β’ Market: Index Futures
β’ Time: 10:20 AM EST
β’ Impulse Move: Breakout from range (4202 β 4230)
β’ FVG Zone: 4218.5β4222.0
β’ Pullback: Price returns to 4220.2, forms small inside bar
β’ Entry: Long at 4221.0
β’ Stop: 4218.0
β’ TP1: 4230 (swing high)
β’ TP2: 4237 (measured extension)
β
Result: 3-point risk, 9β16 point gain | 3β5.3R profit
π΄ Example #2: Bearish FVG Continuation After News Spike
β’ Market: Commodities
β’ Time: Post-NY Open
β’ Impulse Move: Sharp drop on CPI data (77.80 β 76.10)
β’ FVG Zone: 76.65β76.35
β’ Pullback: Price returns to 76.48 and stalls
β’ Entry: Short at 76.40
β’ Stop: 76.66
β’ TP: 75.90
β
Result: 26-tick risk, 50-tick gain | 1.9R profi
π‘ Example #3: Micro Pullback During Trend Run
β’ Market: Currency Futures
β’ Time: 13:10 EST
β’ Impulse: Trend move up (1.0825 β 1.0880)
β’ FVG: 1.0846β1.0852
β’ Pullback: Price taps 1.0850 and immediately bounces
β’ Entry: Long at 1.0853
β’ Stop: 1.0845
β’ TP: 1.0882
β
Result: 8 pip risk, 29 pip gain | 3.6R profi
These examples highlight how the FVG Continuation Strategy offers:
β’ Predictable entries
β’ Tight stops
β’ Consistent structure-based targets
π§ Pro Tips & Common Mistakes for FVG Continuation Traders
Trading Fair Value Gaps can be incredibly effective β but only if you avoid traps and apply discipline in your confirmation and execution. Hereβs how to refine your edge:
β Pro Tips for Precision
π§ 1. Only Trade FVGs After Strong Impulses
If the move before the gap was weak, the gap is likely to fail or get filled and broken.
Look for full-bodied candles, range breaks, or news spikes before the FVG forms.
π 2. Use Session Timing as a Filter
The best FVG continuations occur during:
β’ London & NY overlap
β’ NY open
β’ After scheduled news releases
Avoid taking setups during low-volume hours.
π 3. Let Price Show You Respect for the Gap
You donβt need to predict. Wait for wick rejections, pause candles, or momentum shifts inside the gap before entering
π― 4. Combine FVGs With Structure or Trend Tools
If an FVG aligns with:
β’ A previous swing high/low
β’ A key moving average
β’ VWAP or previous dayβs open
β¦it has a much higher probability of respecting the zone.

β Common Mistakes to Avoid
π« 1. Entering on First Touch Without Confirmation
Not all gaps are respected. Entering blindly leads to whipsaws.
Wait for confirmation β even a single candle rejection or stall is better than guessing.
π« 2. Forcing FVGs in Choppy Markets
In consolidation zones, price often pierces through small FVGs.
Only trade FVGs after clear, directional momentum has been established.
π« 3. Placing Stops Inside the Gap
This is one of the biggest mistakes β it causes premature exits.
Place your stop beyond the FVG, not inside it.
β
Strategy Summary & Trader Checklist
The Fair Value Gap Continuation Strategy is a precision tool for trend traders who want to enter after momentum is confirmed β not during the chaos. It uses simple logic: wait for an imbalance, let price return to it, then ride the continuation with minimal risk.
π§ Quick Strategy Recap
Step Action
- Identify the Impulse Look for a strong move with full-bodied candles and range expansion
- Mark the FVG Use the gap between Candle 1βs wick and Candle 3βs wick
- Wait for Pullback Let price re-enter the FVG β ideally mid-zone
- Confirm Watch for rejection wick, doji, or volume/momentum slowdown
- Enter & Manage Enter on confirmation candle, stop beyond FVG, TP using structure or measured move
π FVG Continuation Trader Checklist
Before taking a trade, confirm:
β’ Did a strong impulse move precede the gap?
β’ Is the FVG clean and clearly defined?
β’ Is price returning to the FVG, not slicing through it?
β’ Am I seeing reaction or hesitation inside the zone?
β’ Is this trade aligned with trend, session, or macro context?
β’ Is my SL outside the gap and my TP based on structure?
β’ Am I staying disciplined, not forcing a trade?
π Final Thought
The Fair Value Gap Continuation Strategy isnβt just another technical trick β itβs a mindset shift. It teaches you patience, precision, and respect for market structure. Too many traders chase price during chaos, jumping into volatile moves without a plan, only to get stopped out or caught on the wrong side of momentum. But when you learn to wait β to let the market reveal its intent through a clean return to imbalance β you move from reactive to deliberate trading.
The beauty of this strategy lies in its simplicity: identify strength, mark the gap, wait for confirmation, and execute with clarity. It filters out the noise and anchors your decisions in structure, not emotion. Over time, mastering FVG continuations builds more than your P&L β it builds discipline, confidence, and trust in your process. Because in trading, itβs not about catching every move β itβs about catching the right ones, with consistency and control. Let the market come to you. Trade whatβs clear. And let your patience be your edge.
Many traders underestimate how powerful the Fair Value Gap Continuation Strategy can be when combined with a deep understanding of market structure and institutional flow. As explained by Investopedia, identifying the underlying market structure helps traders align their setups with the path of least resistance β an essential skill when working with FVGs. Beyond just spotting gaps, itβs critical to develop an edge through context, patience, and timing. If you want to refine your edge even further, check out our top trend trading strategies guide β a perfect complement to the FVG approach for building consistent, structured trades.
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