Fair Value Gap (FVG): The Core Delivery Imbalance

Fair Value Gap (FVG) - Fair value gap - is one of the most characteristic and powerful concepts of the ICT approach. FVG represents an effective imbalance in the market, where one party (buyer or seller) takes complete control and pushes the price very quickly.

1. Definition & Classification of Fair Value Gap (Identification)

FVG is always identified by a cluster of 3 consecutive candles. According to original ICT terminology from Michael J. Huddleston, FVG is classified based on the nature of supply and demand imbalance as follows:

BISI (Buy-side Imbalance Sell-side Ineffectiveness)

Bullish FVG (Bullish FVG)

Occurs when there is a very strong bullish candle in the middle (candle 2). The BISI gap is calculated from Top of candle 1 arrive Bottom of candle 3. This zone represents imbalance: too much Buy-side Imbalance and ineffective Sell-side Ineffectiveness. It acts as a price support when the market corrects again.

SIBI (Sell-side Imbalance Buy-side Ineffectiveness)

Bearish FVG

Occurs when there is a very strong bearish candle in the middle (candle 2). The SIBI gap is calculated from Bottom of candle 1 arrive Top of candle 3. This zone represents an imbalance: too much Sell-side Imbalance and ineffective Buy-side Ineffectiveness. It acts as a resistance area to suppress prices when the market recovers and increases again.

2. Important Value Areas in FVG

An FVG blank is more than just an empty box. It is divided into essential points that traders must follow extremely closely:

FVG High/Low (Border Range): Is the starting point (Top of candle 1) and ending point (Bottom of candle 3) of rising FVG (opposite of falling FVG). When the price just touches this border, this is the earliest reaction.
Consequent Encroachment (CE 50%): The moving average is exactly 50% of the width of the FVG gap. In the IPDA algorithm, CE is considered the internal balance level of the gap.
💡 Candle body rules: If the price retraces to FVG but the candles react cannot close (Close) beyond 50% CE (leaving only the wicks sweeping across), that confirms that this FVG is extremely strong and the price will immediately reverse to follow the main trend.

Cấu trúc chi tiết khoảng trống giá trị hợp lý Fair Value Gap FVG trên TradingView

📷 Figure 4.1: Actual structure of a Bullish FVG on Nasdaq. The body of the test retracement candle did not close past the 50% Consequent Encroachment (CE) threshold before continuing to increase.

3. How to Identify an FVG with a High Win Probability (Strong)

An FVG is considered highly reliable when it meets all of the following momentum and structure factors:

⚡ Outstanding Displacement Momentum:

Candle number 2 that creates FVG must be an extremely large candle, completely superior to the previous candles. The longer the candle body is, the stronger the large cash flow is participating in pushing the price.

🛡️ Comes with Liquidity Scan & Structural Breakdown:

The strongest FVG is the one created immediately after a stop-loss sweep (Liquidity Sweep) and at the same time creates a break of the trend structure (BOS or MSS). This proves that Smart Money has just finished collecting goods and started pushing prices away.

🌐 FVG has wide and clean spaces:

The wider the gap between candle 1 and candle 3, the larger the imbalance area, and the stronger the force that attracts prices back to cover.

4. Warning: Not all FVGs can be used!

⚠️ FVG TRAP WARNING (Low-Quality FVG): The biggest mistake of traders new to ICT is entering orders at any FVG gap that appears on the chart. This will cause you to constantly be scanned for stop losses due to trading at "junk" FVGs.

Apply the strict FVG quality filter below to increase your winning rate:

Premium & Discount principles: Only consider BUY orders at FVGs below 50% of the current price range (Discount). On the contrary, only consider SELL orders at FVGs above 50% (Premium). Trading against this principle means you are buying high and selling low.
Mitigated FVG: If the price ever regresses to more than 50% fill or completely fills that FVG at once, that FVG has completed its task of balancing supply and demand and is no longer worth using for subsequent times.
FVG lacks structural context: FVGs appear randomly between accumulation waves (Sideways), without accompanying liquidity scanning or BOS/MSS behavior, and are mostly algorithmic lure traps (Inducement).
FVG on too small time frame without large frame support: FVG on a 1m or 5m frame will be extremely vulnerable to penetration if it does not coincide with an FVG or Order Block area of the large frame (H4/D1).