Which option best defines a Fair Value Gap in this context?

Which option best defines a Fair Value Gap in this context?

• A. A price range with abundant liquidity
• B. A zone where orders are actively resting
• C. A temporary halt in trading
• D. A price range with a lack of liquidity

Answer: (D)

A Fair Value Gap is a price range left behind after a sharp move, where liquidity didn’t have time to fill orders, creating a void with little trading interest. In this area, price can move through quickly because there aren’t many resting orders to provide support or resistance. Traders view these gaps as zones where fair value is rebalanced, often expecting prices to return and fill the gap. This is not about an area with abundant liquidity, nor simply a zone where orders are resting, nor a temporary trading halt. The key idea is a lack of liquidity in that price range due to the rapid move.

A Fair Value Gap is a price range left behind after a sharp move, where liquidity didn’t have time to fill orders, creating a void with little trading interest. In this area, price can move through quickly because there aren’t many resting orders to provide support or resistance. Traders view these gaps as zones where fair value is rebalanced, often expecting prices to return and fill the gap.

This is not about an area with abundant liquidity, nor simply a zone where orders are resting, nor a temporary trading halt. The key idea is a lack of liquidity in that price range due to the rapid move.