Order block vs fair value gap: what is the difference?
Order blocks and fair value gaps often sit close to each other on a chart, so they are easy to mix up. They come from different things, though, and knowing the difference makes your zones more consistent.
Order block
An order block is the last opposite candle before a strong move: the last down candle before a rally, or the last up candle before a sell-off. The idea behind it is that larger orders were placed there, and price may come back to that area later.
Fair value gap
A fair value gap is a gap inside a fast move. Take three candles in a row: in a rally, if the high of the first and the low of the third do not overlap, the space between them is the gap. In a sell-off, it is the low of the first and the high of the third. It shows that price moved so quickly that one side was barely traded.
Step through it
The chart goes from the structure to the break, the gap, the order block and the retest. Use the steps, or the arrow keys.
Structure
Price makes a swing low, bounces to a swing high, then pulls back without breaking the low.
Break of structure
A strong rally closes above the last swing high. That break is the first sign that the structure has turned bullish.
Fair value gap
The rally is so fast that the high of the candle before it and the low of the candle after it never overlap. The gap between them is the FVG.
Order block
The last down candle before the rally. Many SMC traders treat this zone as the place where larger orders entered.
Retest
Price returns through the gap into the order block, then continues higher. This is one possible path, not a rule. Measuring how often it happens is what this site is about.
The difference in one table
| Order block | Fair value gap | |
|---|---|---|
| What it is | A candle | A gap between candles |
| Where it sits | Just before the move | Inside the move |
| What it needs | A strong move after it | Three candles without overlap |
| Typical use | A zone to watch on a return | A zone price often fills |
How to make them objective
- Define the strong move in a rule, for example a break of structure within a set number of candles.
- Decide whether the order block is the whole candle or only its body, and keep to it.
- Decide when a zone is used up: after the first touch, or only after a close through it.
The same rules make a zone possible to code, and let you measure how often price really reacts to it.