Fair Value Gap Indicator (MT5)

About the Fair Value Gap Indicator

The Fair Value Gap indicator for the MetaTrader 5 platform is a price action tool designed to automatically identify fair value gaps, also known as imbalances, directly on the chart.

These gaps develop when strong buying or selling pressure causes price to move rapidly through a zone, leaving an area where relatively little trading took place.

The indicator highlights these areas so they can be monitored for potential retracements, continuations and reversals.

Bullish gaps can act as potential demand zones, while bearish gaps may provide areas of supply.

This makes the tool useful for traders who follow market structure, institutional-style price action and liquidity-based trading methods.

Fair value gaps are particularly valuable when they appear during a strong displacement move or around an important breakout.

A retracement back into the gap can offer a more precise location for an entry than chasing the initial impulse.

Free Download

Download the “Fair Value Gap Indicator MT5.ex5” for MT5

Key Features

Automatically identifies potential bullish and bearish fair value gaps
Displays imbalance areas directly on the MT5 price chart
Helps locate potential retracement and reaction zones
Useful for breakout, continuation and reversal strategies
Can be combined with market structure, liquidity and support/resistance analysis
Suitable for multiple Forex pairs and MT5 time frames

Indicator Chart

The Fair Value Gap indicator marks areas where an imbalance has developed between buyers and sellers.

A bullish gap is formed during strong upward price displacement, while a bearish gap appears during an aggressive downward move.

These highlighted zones can remain relevant after the initial impulse.

When price later returns to an unfilled gap, the area can become a point of interest for a continuation trade or, depending on market structure, a reaction in the opposite direction.

Guide to Trade with Fair Value Gap Indicator

Buy Rules

Identify a bullish fair value gap created by strong upward price movement.
Check whether the gap agrees with the broader market structure.
Wait for price to retrace into the bullish gap.
Look for bullish price action or a rejection from the zone.
Open a buy position after confirmation.

Sell Rules

Locate a bearish fair value gap produced by strong downward displacement.
Confirm that the broader structure supports a bearish outlook.
Allow price to return into the bearish gap.
Watch for rejection or renewed selling pressure inside the zone.
Enter short after the bearish confirmation.

Stop Loss

For long positions, place the stop below the bullish gap or the nearby swing low.
For short positions, place the stop above the bearish gap or recent swing high.
Give volatile instruments sufficient room beyond obvious liquidity levels.

Take Profit

Use previous swing highs or lows as initial targets.
Consider the next opposing fair value gap as a potential profit objective.
Major support and resistance zones can provide additional exit levels.
A fixed risk-to-reward target such as 1:2 can also be used for consistent trade management.

Fair Value Gap + Simple Scalp MTF MT5 Strategy

This strategy combines the Fair Value Gap Indicator for MT5 with the Simple Scalp MTF Indicator for MT5 to identify short-term entries around important imbalance zones.

The Fair Value Gap Indicator marks bullish and bearish price gaps, while the Simple Scalp MTF Indicator provides the directional scalp signal.

A green arrow represents a buy scalp signal, while a brown arrow indicates the opposite, bearish setup.

The key is to wait for the scalp signal to appear at or close to a relevant fair value gap rather than taking every arrow.

This creates a confluence between the location of price and the short-term trading direction.

Buy Entry Rules

Use the M5 chart and identify a bullish fair value gap below or close to current price.
Wait for price to retrace into the bullish gap.
Look for the Simple Scalp MTF Indicator to print a green buy arrow.
Prefer a setup where the green arrow appears after price has reacted from the fair value gap rather than while price is falling strongly through it.
Enter the buy position after the confirmation candle closes.
Place the stop loss below the fair value gap or below the most recent M5 swing low.
Use the next resistance area, previous swing high or a minimum 1:2 risk-to-reward ratio as the profit objective.

Sell Entry Rules

Find a bearish fair value gap above or near the current market price.
Allow EURUSD to retrace upward into the bearish imbalance zone.
Wait for the Simple Scalp MTF Indicator to produce a brown arrow.
Look for bearish rejection from the gap before committing to the position.
Enter the short trade after the confirming candle closes.
Place the stop above the fair value gap or the latest M5 swing high.
Target the previous low, a nearby support zone or a predefined risk-to-reward level.

Advantages

Combines a price-location tool with a dedicated scalp signal.
Helps avoid taking signals in the middle of a random price range.
Provides logical areas for stop-loss placement around market structure.
Can be used for quick M5 entries while higher-timeframe context is considered.
Works particularly well on liquid currency pairs during active sessions.

Drawbacks

Some fair value gaps will be completely filled without producing a reversal.
The scalp arrow can arrive after the best part of the move has already occurred.
Fast markets can move through the gap and hit the stop before the expected reaction develops.
Very quiet periods can generate weaker M5 setups.

EURUSD M5 Example

Market condition: EURUSD is trading lower during an active European session, but the latest bearish move has started to lose momentum.
Fair value gap: A bullish fair value gap has formed around 1.1662–1.1666 during a previous upward displacement.
Retracement: Price drops back toward the highlighted gap and enters the zone.
Confirmation: Selling pressure fails to push EURUSD through the entire imbalance, and the Simple Scalp MTF Indicator prints a green arrow.
Entry: A buy entry can be considered around 1.1666 after the M5 confirmation candle closes.
Stop loss: Place the stop around 1.1656, below the bullish gap and recent intraday swing low.
Risk: The distance is approximately 10 pips, keeping the risk defined before entering.
First target: 1.1676 near the recent M5 swing high.
Final target: 1.1686 if bullish momentum continues and the next resistance level is reached.
Trade management: Once EURUSD moves clearly in favor of the position, part of the profit can be secured while the remainder is allowed to target the higher resistance level.

The bearish setup works in the same way from the opposite side.

A bearish fair value gap above price becomes the area of interest, and a brown arrow from the Simple Scalp MTF Indicator provides the short-term confirmation.

The stop can be positioned above the gap, while the previous M5 low or another support zone becomes the target.

Download Now

Download the “Fair Value Gap Indicator MT5.ex5” for MetaTrader 5

Indicator Settings

The Fair Value Gap Indicator for MT5 includes several options that allow the display and calculation of the detected gaps to be adjusted according to your trading preferences.

Bars to Calculate FVG: Determines how many historical bars are analyzed when searching for fair value gaps. A larger value allows the indicator to examine more historical price action.
Show Covered Areas: Controls whether fair value gap zones that have already been covered or filled by price remain visible on the chart.
Font Size: Adjusts the size of the text displayed by the indicator, making labels easier to read on different screen sizes and chart timeframes.
Colors: Allows the visual appearance of the fair value gap zones and related elements to be customized for better chart readability.

FAQ

What is a fair value gap?

A fair value gap is an imbalance created by rapid price movement where the market moves through a price area quickly. These zones can later become areas of interest when price returns.

How can the indicator be used?

It can be used to locate potential retracement zones and then combined with market structure, support and resistance, liquidity or candlestick confirmation before entering a trade.

Are all fair value gaps tradable?

No. The quality of the surrounding market structure is important. A gap created during strong displacement and aligned with the broader trend can carry more significance than an isolated gap during sideways conditions.

Which time frame is best?

The indicator can be used on multiple MT5 time frames. M5 and M15 can suit scalping and day trading, while H1 and H4 can provide broader zones for swing-oriented analysis.

Why Use It?

The Fair Value Gap Indicator for MT5 makes it easier to identify price imbalance zones without having to manually scan the chart for them.

By highlighting bullish and bearish gaps, the tool provides clearly defined areas to watch for potential retracements, continuation entries and market reversals.

It becomes particularly useful when fair value gaps are combined with market structure, support and resistance, or price action confirmation.

This makes the indicator suitable for both short-term setups and higher-timeframe analysis.