Fair Value Gap
Also: FVG, imbalance
Material Conflict
Versions contain contradictory rules — review version history below.
A Fair Value Gap (FVG) is a 3-candle price formation on any timeframe where the middle candle delivers price exclusively on one side — either all sell-side or all buy-side liquidity — leaving a pocket of price range where the opposing liquidity has never been offered. The gap is defined by the low of the candle immediately to the LEFT of the middle (drive) candle and the high of the candle immediately to the RIGHT of the middle candle (for a bearish FVG). Price is expected to return to this range and deliver the opposing liquidity. On lower timeframes the same range will often appear as a Liquidity Void (multiple long-bodied candles). FVGs also overlap with Liquidity Pools: a FVG sitting above equal highs is simultaneously a Liquidity Pool run target and a gap fill objective.
Identification6
- Three consecutive candles are required.
- Bearish FVG: The LOW of candle 1 (left candle) is higher than the HIGH of candle 3 (right candle). The space between candle 1's low and candle 3's high is the FVG range. The middle (drive) candle is a large bearish candle that covers that gap.
- Bullish FVG: The HIGH of candle 1 (left candle) is lower than the LOW of candle 3 (right candle). The space between candle 1's high and candle 3's low is the FVG range. The middle candle is a large bullish candle.
- Refinement: Exclude portions of candle 1 and candle 3 ranges that have already been retraded. For bearish FVG — candle 1's range from its low up to its close has already seen buyside delivery (the candle closed off the low); the FVG therefore begins at candle 1's LOW, not its close. Similarly, candle 3's range from its open up to its high has seen buyside delivery; the FVG top is therefore candle 3's HIGH.
- The gap occurs on the timeframe being analysed. Dropping to a lower timeframe will often show the same range as a Liquidity Void (multi-candle one-sided delivery).
- FVG is confirmed open when no candle body has closed inside the gap range on that timeframe.
Entry4
- Bearish FVG entry: After price runs sell-side liquidity (old low) or buy-side liquidity (old high), wait for price to rally back up to the FVG range. Sell at the FVG (limit sell at the top or mid of the gap range). Confirmation: body of up candle closes into the gap without closing through it.
- Bullish FVG entry: After price runs sell-side liquidity, wait for price to retrace down to the FVG range. Buy at the FVG (limit buy at the bottom or mid of the gap range).
- A common gap (candle-to-candle body gap) forming at the FVG level during the fill attempt provides the most refined limit-order entry: place sell limit inside the common gap.
- Turtle soup (false break of old low) below the FVG followed by a rally into the FVG is a high-probability sequence — equal highs above the FVG act as the buy stop run target for the exit.
Stop2
- Bearish FVG entry: Stop above the top of the FVG (above candle 1's low for a bearish gap).
- Bullish FVG entry: Stop below the bottom of the FVG (below candle 3's low for a bullish gap).
Target4
- Old highs / buy-side liquidity pool above the FVG (for bullish fills).
- Old lows / sell-side liquidity pool below the FVG (for bearish fills).
- The FVG is the entry, not the target; targets are external liquidity pools or contrary order blocks.
- When an FVG sits above equal highs, the run on those equal highs (liquidity pool) and the FVG fill are the same event — both are satisfied simultaneously.
Invalidation2
- A candle body fully closes through the gap range — the FVG is filled and balanced; concept is satisfied.
- Note: A wick trading through the gap does not constitute a fill; ICT specifies bodies closing the range: 'the bodies of the candle completely closing here.'
Inferred Conditions (Unvalidated)
- FVGs, Liquidity Voids, Order Blocks, and Liquidity Pools overlap: a trade can simultaneously be a FVG fill, a liquidity pool run, and a return to an order block. ICT notes this explicitly.
- In range-bound or holiday-period market conditions, FVG + double-top (equal highs) + turtle soup is the primary trade model.
- On a monthly timeframe, an FVG acts as a long-term magnetic draw; daily and intraday entries align with it as their higher-timeframe objective.
ICT Quotes
"A fair value gap is a range in price delivery, where one side of the market liquidity is offered and typically confirmed with the liquidity void on the lower timeframe charts in the same range of price."
"The candle to the left of the down candle we're looking at, it comprises the fair value gap... And we have the higher bearish candle. And I'm drawing attention to the fact that it has a down close, but it's come off the low... If you take that same range and you look at our down candle that created that fair value gap on the daily chart that range between one to 515 to approximately 105."
"We're delineating the low of the previous candle and the high of the candle to the right of the down candidate, that creates that little pocket of space. So between 105 big figure down to 104 75 about 25 pips that is our fair value gap and it's been left open."
"The gap occurs on the timeframe you're looking at. On a lower timeframe, it would many times appear as a liquidity void where it's multiple candles that create the open space of range."
"Imagine that paintbrush analogy I've used many times in the past — one of the down candle that creates the lowest low here, there's a range with the candle before and the candle after it, where it has left a pocket of porous price action, we're only delivered on the downside, we're going to expect price to eventually want to trade back up into that little gap area."
"The bodies of the candle completely closing here so this gap between these two candles these two black down candles, this gap in between the bodies have perfectly been filled in with this up candle. So this is exactly what I'm referring to as efficiency in terms of the price delivery."
Timeframes
Version History9 versions
36-ICT Mentorship Core Content - Month 4 - ICT Fair Value Gaps FVG.srt
"We're gonna be dealing specifically with the reinforcing of fair value gaps. And it's a concept of trading inside the range. Okay, what is a fair value gap? It is a range in price delivery, where one …"
Initial definition in 2016 mentorship.
ICT YT - 2022-02-04 - ICT Mentorship 2022 Episode 6.srt
""Think of it like a paint roller. The middle candle is the roller. It paints the wall going in one direction — only one side of the market is offered. That leaves a gap — the FVG — where the other sid…"
2022 mentorship formalizes the FVG with the 3-candle paint-roller analogy applied explicitly to ES/NQ/YM index futures. Key 2022 additions: (1) Displacement requirement: the middle candle must be a displacement candle (energetic, animated move) — lethargic FVGs are lower quality. (2) Displacement High / Displacement Low labels introduced as the FVG boundary reference points. (3) Top-down process formalized: 5m → 4m → 3m → 2m → 1m to frame the FVG entry from higher to lower timeframe. (4) Asian range explicitly does NOT apply to index futures — FVG setups for indices focus on London (2–5 AM NY) and NY morning (7–10 AM NY for Forex; 8:30–11 AM NY for index futures) killzone windows. (5) First use of FVG entry in combination with Market Structure Shift confirmation: take out liquidity → displacement → FVG → retracement entry. (6) Index futures application fully demonstrated on ES/NQ charts for the first time in this mentorship series.
ICT YT - 2024-08-07 - ICT 2024 Mentorship - Lecture 03.srt
"Consequent encroachment is the midpoint of any gap or any inefficiency. If it's a SIBI, that means it's a down close fair value gap. The midpoint is consequent encroachment. The best shorts will form …"
2024 QUALITY RULE ADDED: Best longs form in the upper half of a bullish FVG; best shorts form in the lower half of a bearish FVG. Leaving the opposing half open is a breakaway gap signal indicating large range expansion. The 50% midpoint is explicitly named "consequent encroachment" (not equilibrium — equilibrium requires a range that has traded both directions). Also introduces SIBI/BISI terminology: SIBI = sell side imbalance, buy side inefficiency (bearish/down-close FVG); BISI = buy side imbalance, sell side inefficiency (bullish/up-close FVG). An inversion FVG is confirmed to be a DISTINCT concept from a standard FVG (L03, 00:16:41): "an inversion fair value gap is not just a fair value gap."
ICT YT - 2024-08-23 - ICT 2024 Mentorship - Lecture 15.srt
"this is your real first fair value gap... it's first presentation between 930 and 10am filter is you cannot have it until 931 so that is the earliest it can form it. The first presentation has to be i…"
2024 Lectures 13–24 additions (Aug 20–Sep 9, 2024): (1) First Presentation FVG named as distinct intraday sub-type: the first FVG forming during the Opening Range (9:31 AM–10:00 AM ET, RTH). Must appear in both ETH and RTH chart views. Carried through day until 3:45 PM macro. Has a 3-trading-day lifecycle (day 1 = strongest). (2) Inversion FVG — upper half condition: for a valid inversion, the upper half of the original bullish FVG must remain open (no body close). Displacement through the first presentation FVG converts it to an inversion FVG. (3) Muddy-day exception: on directionless sessions, first presentation FVG may not form cleanly; skip and wait for clarity. (4) Manual intervention suspension: NFP/FOMC/CPI/PPI days — suspend first presentation FVG timing rules; wait 15-30 minutes after data release. No material conflict with prior FVG definition — these are application refinements and a named sub-type. See first-presentation-fvg.yaml for full specification.
ICT YT - 2022 Mentorship 2022 (Episodes 35–41 and Topical Study)
""scalping model… fair baby get with an order block and optimal trade entry is the gold standard of the ICT pattern that's taught on this YouTube channel" (Episode 41, Final)"
Mid-to-late 2022 mentorship (Episodes 35–41 and Topical Study 2022-06-27) introduces additional FVG application contexts: (1) Scalping vs day trading: FVG entry on 1m–2m chart = scalping model; FVG entry on 5m–15m chart = day trading model (Episode 38 explicit distinction). (2) FVG + OB + OTE combination named the "gold standard" of ICT patterns (Ep 41). (3) Dealing Range context: FVGs in the discount half of the dealing range (below 50% equilibrium) are bullish entries; FVGs in the premium half are bearish entries. (4) Breakaway FVG variant: an FVG left open during impulsive displacement that price does not return to fill until far-end objectives are met — classified as a Breakaway Gap (see breakaway-gap.yaml; Topical Study 2022-06-27). (5) Bridge Builder (2022-10-10) introduces the redelivery vs. rebalancing distinction: when price returns to an FVG and reprices through it, that is "redelivery" (not "rebalancing" — ICT explicitly rejects the term "rebalancing" as a misnomer introduced by others). No material conflict with prior definition — all changes are application refinements.
ICT YT - 2024-09-30 - ICT 2024 Mentorship - Lecture 36.srt
"if we ever trade back above and back into this fair value gap and come back down into it, this would be classified as a reclaimed, bullish fair value gap, because it's an up close candle. That's how y…"
MATERIAL CONFLICT: ICT explicitly corrects prior on-air mislabeling. An FVG formed by an up-close (bullish) candle that price returns to from above must be called a "reclaimed bullish fair value gap," NOT an "inversion fair value gap." The inversion label is reserved for bearish FVGs (down-close candles) that are flipped bullish after price trades through them. This is a firm terminological boundary. material_conflict flag set to true for this file.
24 - ICT 2026 Smart Money Concepts Lecture ⧹ January 02, 2026.en.srt
"I'm going to be looking for the inefficiency if it exists on the buy side of the curve. That one is going to be much more sensitive and more precise in my opinion than that of the fair value gap that'…"
2026 BUY SIDE OF CURVE FVG PREFERENCE: When a swing high forms and there are FVGs on both sides, ICT prefers the FVG on the buy side of the curve (left side, before the rollover). It is "much more sensitive and more precise" than the FVG on the sell side (right side, after the rollover). The buy-side FVG acts as an inversion PD array. Caveat: you may not get filled because a smaller FVG lower on the sell side may be used instead and your limit order never triggers. Also reiterates volume imbalance within this context: if a volume imbalance exists on the buy side of the curve alongside or as part of a FVG, do not disregard it.
21 - ICT 2026 Smart Money Concepts Lecture ⧹ January 13, 2026.en.srt
"that gap is a common gap to me. This is the first presented fair value gap because it displaces above this high, not engulfing the previous candle. That's not what this is."
2026 COMMON GAP vs DISPLACEMENT FVG: ICT explicitly categorizes small non-displacement gaps as "common gaps" — these are not interesting for trading. A valid FVG for trading must show displacement (running through a prior short-term high or low). An engulfing candle is NOT displacement and is NOT a shift in market structure. Also defines stop placement for bullish FVG entries: stop below candlestick number one's low.
15 - ICT 2026 Smart Money Concepts Lecture ⧹ February 11, 2026.en.srt
"it's not a valid fair value gap. There's lots of gaps that would look just by label only and by you surface description. Oh, that's a that's a fair value gap. But not all fair value gaps are created e…"
FVG QUALITY HIERARCHY: ICT explicitly states 'not all fair value gaps are created equal.' High probability FVGs form in close proximity to gradient levels from higher timeframe PD arrays (e.g., suspension block gradient levels). A FVG that 'touches' a gradient level is valid for trading. FVGs that do not align with any gradient level are lower quality. This is a selection filter, not a structural change to FVG definition. Also reinforces that imitators who label any 3-candle gap as an FVG without checking this proximity requirement are incorrect.
Notes
Identification precision note: ICT's refinement of which part of the 3-candle range defines the FVG is important. Candle 1 (left) and Candle 3 (right) already have portions where buyside delivery occurred (the bounce from the low on candle 1, and the open-to-high on candle 3). Those portions are excluded. The pure FVG is only the portion where zero buyside delivery has been offered — i.e., from candle 1's low to candle 3's high (for a bearish FVG), after netting out the already-delivered portions. Relationship to Liquidity Void: FVG and Liquidity Void are related but distinct at the 2016 teaching level. A FVG is a precise 3-candle structure on one timeframe; a Liquidity Void on a lower timeframe corresponds to the same price range but appears as multi-candle one-sided delivery. ICT explicitly states this overlap in this file. Relationship to Vacuum Block: If a Vacuum Block (literal price gap) partially fills to an order block and leaves a residual open range, that residual is relabeled a Fair Value Gap (per file 33 teaching, timestamp 00:13:26). Fill criterion: Bodies must close the gap; wicks alone do not constitute a fill. This is operationally important for entries — a wick into the FVG without a body close is not a fill; price may still react from the gap. Breakaway gaps and measuring gaps are referenced at timestamp 00:08:36 as related gap concepts to be covered in December study notes — insufficient codifiable rules in this file to create separate entries for those sub-types. 2022 pedagogy addition — paint-roller analogy (Ep 6): ICT describes the FVG middle candle as a paint roller going in one direction — it only paints one side of the wall (offers one side of market liquidity), leaving the other side undelivered. That undelivered side is the FVG. This analogy makes the 3-candle rule vivid and memorable. 2022 quality distinction (Ep 6): An FVG with displacement (energetic middle candle) is high probability. An FVG with a lethargic middle candle is lower quality. This displacement requirement was implicit in the 2016 content but made explicit in 2022. 2022 index futures application: FVG setups on ES/NQ fully demonstrated in Episodes 3–7. The model is mechanically identical to Forex but applied within the 8:30–11:00 AM NY morning session and 1:30–4:00 PM afternoon session killzone windows. See also: displacement.yaml, market-structure-shift.yaml 2024 INVERSION FVG IS DISTINCT FROM FVG (L03, Aug 7 2024): ICT explicitly states "an inversion fair value gap is not just a fair value gap. There are two distinct things going on there." (L03, 00:16:41). The inversion FVG has its own mechanics — it was a bearish FVG that price traded below, then price returns up into it and the former support (the gap that should have held price up) becomes resistance. This is not simply a FVG that retraced — it is a FVG that was violated and flipped polarity. The 2022 content introduced the concept; the 2024 mentorship explicitly clarifies that students treating them as identical are making an error. 2024 OPTIMAL FVG ENTRY WITHIN SESSION (L03): ICT provides a clear quality rule: for a bullish FVG, the best fills are in the UPPER half of the gap (leave the lower half open — if the lower half fills, it becomes a breakaway gap signal for large range expansion). For a bearish FVG, the best shorts form at the LOWER half of the gap (leave the upper half open). Quote: "The best shorts will form at the lower half of that [bearish FVG] because you want to see the upper half left open. A midpoint of a BIAB [bullish imbalance, bearish area — up-close FVG] — the best fills for going long are going to form in the upper half." (L03, 00:33:48) 2024 SELL SIDE IMBALANCE / BUY SIDE IMBALANCE TERMINOLOGY (L03, L07): ICT uses "SIBI" (sell side imbalance, buy side inefficiency) and "BISI" (buy side imbalance, sell side inefficiency) as named FVG variants in 2024. A SIBI is a bearish FVG (down-close delivery leaves buy-side inefficiency above); a BISI is a bullish FVG (up-close delivery leaves sell-side inefficiency below). These terms appear to be used interchangeably with bearish/bullish FVG but emphasize the delivery direction of the creating candle. 2024 RECLAIMED FVG vs INVERSION FVG — MATERIAL TERMINOLOGY CORRECTION (L36, Sep 30 2024): ICT explicitly corrects a live on-air mislabeling from Lecture 35 (prior week). The distinction that must be applied: — INVERSION FAIR VALUE GAP: A bearish FVG (formed by a down-close candle) through which price has traded bullishly, causing the formerly bearish gap to act as bullish support on a return. The candle that created the gap was a DOWN CLOSE. — RECLAIMED BULLISH FAIR VALUE GAP: A bullish FVG (formed by an UP-close candle) that price returns into from above. Classification is by the candle that CREATED the gap: up-close candle = bullish FVG = reclaimed bullish FVG when re-tested from above. ICT's exact correction (L36, 02:19:33): "if we ever trade back above and back into this fair value gap and come back down into it, this would be classified as a reclaimed, bullish fair value gap, because it's an up close candle. That's how you classify it. I made the mistake of calling it an inversion fair value gap last week when it wasn't." This is a MATERIAL CONFLICT with any prior usage of "inversion FVG" for up-close-candle gaps. The correct term for an up-close FVG retested from above is "reclaimed bullish FVG." See also: reclaimed-order-block.yaml (updated to active, 2024). 2024 FIRST PRESENTATION FVG — NAMED INTRADAY SUB-TYPE (Lectures 15–22, Aug-Sep 2024): The "First Presentation FVG" is the FIRST FVG to form during the Opening Range window (9:30 AM–10:00 AM ET, RTH). Key rules added in this batch: (1) 9:31 AM filter — cannot form earlier than 9:31 AM (9:30 RTH candle does not exist). (2) ETH/RTH agreement required — must appear on both ETH and RTH chart views. (3) Carry to 3:45 PM macro — valid for entire trading day until expiry. (4) 3-trading-day lifecycle — day 1 strongest, day 3 last day of relevance. (5) Muddy-day exception — on directionless days, skip if no clean FVG forms. (6) Manual intervention suspension — on NFP/FOMC/CPI/PPI days, do not apply until 15-30 minutes after the data release. See first-presentation-fvg.yaml for full specification. 2024 INVERSION FVG — UPPER HALF CONDITION (Lectures 15–23): Specific condition added: the UPPER HALF of a bullish FVG must remain open (no body close through it) for a valid inversion. If a First Presentation FVG is displaced through impulsively, it converts to an Inversion FVG for the remainder of the session. 2026 BUY SIDE OF CURVE FVG PREFERENCE (Jan 02, 2026): ICT introduces a preference hierarchy for FVGs near swing highs. When a swing high forms and there is an FVG on the buy side of the curve (left side, before the rollover) AND an FVG on the sell side (right side, after the rollover), ICT personally prefers the buy-side FVG: "I'm going to be looking for the inefficiency if it exists on the buy side of the curve. That one is going to be much more sensitive and more precise." The buy-side FVG acts as an inversion PD array. Caveat: you may not get filled because a smaller FVG lower on the sell side may be used instead. This is a refinement of the model 2022 framework. 2026 COMMON GAP vs DISPLACEMENT FVG (Jan 13, 2026): ICT distinguishes a "common gap" (small body gap between candles, no displacement through a prior high/low) from a valid FVG. Common gaps are "not an interesting gap to me" and should not be used for entries. Only FVGs with displacement (run through a prior short-term high or low) qualify as valid trading references. This reinforces the 2022 displacement quality filter.
Asymmetry Notes
Fully symmetrical in structure. Bearish FVG = gap formed by a large bearish middle candle; price expected to return bullishly and fill. Bullish FVG = gap formed by a large bullish middle candle; price expected to return bearishly and fill. Entry direction follows the expected fill direction (sell into bearish FVG when price rallies into it; buy into bullish FVG when price drops into it).