ICT Fair Value Gap (FVG) — Bullish/Bearish Identification, 6-Step Strategy & FVG Family

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ICT FVG, known as the Fair Value Gap, is a three-candle formation with an un-retraced area between the high and low of the 1st and 3rd candlesticks. The fair value gap is the cleanest single concept ICT teaches — once you can spot one, you can build inducement, order block, displacement and order flow on top of it.

A fair value gap is indicated by an imbalance and acts as a level of support and resistance on the price chart.

In this guide I walk you through the FVG concept end to end — the meaning, the bullish and bearish variants, the 6-step identification method, the step-by-step trade flow, the FVG family (regular, inversion, implied, balanced, breakaway, NWOG, NDOG), common mistakes and the FAQ.

You can jump to the section you are most interested in from below or continue reading the full article for a complete view.

What is ICT FVG (Fair Value Gap)?

ICT fair value gap is a three-candle structure indicating a gap between the high and low of the 1st and 3rd candlesticks.

The gap between the three candles is created because price does not retrace into that area and leaves it open.

You can see the example of an ICT FVG in the picture below.

ICT FVG acts as a magnet for price — price retraces back to the fair value gap to balance the price delivery. After retracing to the FVG, price then reverses and continues its trend.

How to Identify an ICT Fair Value Gap

To identify an ICT FVG you need to look for a large candlestick with most body range.

After identifying the large candlestick, mark the high of the candlestick prior to the large candle and the low of the subsequent candlestick.

There will be a visible gap between the high and low of the two candlesticks — that gap is the ICT fair value gap.

Types of ICT FVG

On the basis of price move, the ICT FVG has two main types — bullish and bearish.

(I) Bullish Fair Value Gap

A bullish fair value gap in ICT terms appears during an uptrend with a three-candle pattern.

It happens when the middle candle has a large body, leaving a gap between the high of the first candle and the low of the third candle.

In an uptrend, a fair value gap can serve as strong support, with price often retracing to fill the gap before moving higher.

You can see the example of a bullish fair value gap in the picture below.

(II) Bearish Fair Value Gap

A bearish fair value gap appears in a downtrend within a three-candle pattern.

It forms when the middle candle has a large body, creating a gap between the low of the first candle and the high of the third candle.

In a bearish trend, a fair value gap can act as good resistance, and mostly price tends to fill this gap before moving lower.

You can see the example of a bearish fair value gap in the picture below.

ICT FVG Trading Strategy

To trade using an ICT fair value gap, follow the steps below.

Step 1 — Determine Market Trend. First, identify the market trend of any asset — bullish or bearish. You can use Bias Harian TIK to anticipate the direction of the price move. In a bullish trend, price makes higher highs and higher lows; in a bearish trend, price makes lower lows and lower highs.

Step 2 — Identify Premi dan Diskon Zone. Look for the premium fair value gap in a bearish trend; in a bullish trend, look for the discount FVG.

Step 3 — Identify the Large Candle. Once the trend is determined, find a large candle with large body and small wicks. In a bullish trend look for a strong bullish candle with most body range; in a bearish trend look for a large bearish candle with most body range.

Step 4 — Study Preceding and Proceeding Candles. Now study the one candle before the large candle and the one candle after it. Both of these candles should have such a structure that their bodies do not overlap the body of the middle candle, confirming a fair value gap between the wicks of the 1st and 3rd candle.

Step 5 — Mark the Fair Value Gap. In a bullish trend, mark the gap between the high of the first candle and the low of the third candle. In a bearish trend, mark the gap between the low of the first candle and the high of the third candle.

Step 6 — Execute the Trade. If price is in a bullish trend, wait for price to retrace and test the discount fair value gap to balance the move. When price tests the discount fair value gap, execute a buy trade with other confirmations like rejection or a market structure shift on the lower timeframe.

In the picture given below, price is in a bullish trend making higher highs and higher lows. It retraces back to test the fair value gaps and rejects from them, eventually going higher.

In a bearish trend, wait for price to retrace up and test the premium fair value gap to balance the bearish price delivery. When price visits this gap, it can offer sell opportunities — especially when combined with additional confirmations like rejection or a shift in market structure.

In the image below, the market is in a downtrend forming lower highs and lower lows. It repeatedly tests bearish fair value gaps and rejects from these levels, leading to further price declines.

The FVG Family — Variants You Should Know

The fair value gap has a family of related concepts on this site, each refining the basic FVG for a specific scenario.

First Presented FVG — the very first FVG of the trading day or session. Often the cleanest delivery FVG inside the daily Power-of-3 template.

Valid FVG — the FVG that survives the validity check (no overlapping wicks, sufficient displacement, bias-aligned).

Inversion FVG (iFVG) — an FVG broken in the opposite direction that flips polarity and now acts as the opposite-direction support or resistance.

Implied FVG — a structural FVG implied by the wicks of three candles even when the bodies overlap.

Balanced Price Range (BPR) — the overlap area of two opposite-direction FVGs in the same zone.

Breakaway Gap — an FVG that price never returns to, held by a breaker block, iFVG or BPR in front of it.

NWOG — the weekend gap between Friday close and Monday open.

NDOG — the daily gap between 5:00 PM close and 6:00 PM open New York time.

SIBI / BISI — the directional naming convention for sell-side and buy-side FVGs.

Step-by-Step FVG Trade Flow

This is the exact sequence I run when trading off a fair value gap.

1. Read the higher-timeframe context. 1-day and 4-hour charts — bullish, bearish or neutral structure.
2. Identify premium / discount. Bullish bias targets discount FVGs; bearish bias targets premium FVGs.
3. Mark the bias-aligned FVG. Three-candle pattern with the gap between the 1st-candle and 3rd-candle wicks.
4. Wait for price to retrace to the FVG. Bullish — price comes down to the discount FVG. Bearish — price rallies up to the premium FVG.
5. Drop to the lower timeframe (5-minute or 15-minute). For the entry trigger.
6. Wait for the lower-timeframe MSS at the FVG. A clean break of the most recent counter-trend swing point in the bias direction.
7. Enter on the post-MSS retest. At the consequent encroachment (50% of the FVG) or at the IOFED (the very edge of the FVG).
8. Set the stop. Beyond the FVG far edge or beyond the MSS swing extreme, with a small buffer.
9. Take profit at the next draw on liquidity. Old high or low, relative equal level, or higher-timeframe FVG.

Best Timeframe for ICT FVG Identification

ICT FVG serves different purposes — it can be used on the 1-day chart to set the daily bias, on the 4-hour for the higher-timeframe PD array, and on the 15-minute or 5-minute for trade entries.

If you are using the fair value gap as a Array PD to find trade entries, look for an FVG on the 15-minute or lower timeframes.

Best Pairs for ICT FVG Trading

Initially ICT introduced the fair value gap using index trading like Nasdaq and S&P-500, and it yielded the best results in that market. He then demonstrated examples on forex pairs, and the FVG framework was equally effective there.

These days the ICT FVG serves as a key tool for traders in every market — currencies, indices, metals and crypto.

For traders in the United States who follow the CFTC FIFO and no-hedge rules, the FVG framework maps cleanly onto NQ and ES futures (CME Group) plus regulated forex pairs through US-based brokers. The 09:50 NY-AM macro window and the 10:00–11:00 NY Silver Bullet window are the highest-conviction places to look for FVG entries.

Common Mistakes Around the Fair Value Gap

These are the recurring mistakes I see when traders first start trading the fair value gap concept.

1. Treating every imbalance as a tradeable FVG. Not every fair value gap is tradeable — the FVG must be bias-aligned, in the premium / discount of the higher-timeframe range, and supported by a lower-timeframe MSS to qualify as a setup.
2. Marking FVGs in choppy ranges. FVGs are most reliable inside a directional leg. In a range, every retracement creates noise FVGs that price ignores.
3. Entering at the FVG without confirmation. The FVG is the zone — the entry trigger is the lower-timeframe MSS or order block formed at the zone, not the touch of the zone alone.
4. Confusing the regular FVG with the inversion FVG. A regular FVG holds in the direction of the impulse leg. An inversion FVG flips polarity after being broken. Mixing them up flips the trade direction.
5. Stops parked at the FVG far edge. Tight stops at the FVG boundary get hunted on the second test. The stop should sit beyond the FVG far edge with a buffer, or beyond the MSS swing extreme.
6. Trading FVGs against the higher-timeframe bias. An FVG aligned with the higher-timeframe trend has a much higher hit rate than a counter-trend FVG.

FAQs about ICT Fair Value Gap

Brief answers to the questions readers ask most often about the fair value gap.

What is an ICT Fair Value Gap?

ICT FVG is a three-candle formation with an un-retraced area between the high and low of the 1st and 3rd candlesticks. It indicates an imbalance and acts as a support / resistance level that price often returns to before continuing in the original direction.

How do I identify a fair value gap?

Look for a large body candlestick. Mark the high of the candle before it and the low of the candle after it. The gap between those two levels is the fair value gap.

What is the difference between a bullish and a bearish FVG?

Bullish FVG forms in an uptrend — the gap is between the high of the 1st candle and the low of the 3rd candle, and acts as support. Bearish FVG forms in a downtrend — the gap is between the low of the 1st candle and the high of the 3rd candle, and acts as resistance.

What is the consequent encroachment of an FVG?

Consequent encroachment is the 50% midpoint of the FVG. It is often the most reactive level inside the gap and is used as a refined entry zone.

What is the IOFED of an FVG?

The IOFED (Institutional Order Flow Entry Drill) is the very edge of the FVG — the earliest possible entry. Bullish — just inside the low of the 3rd candle. Bearish — just inside the high of the 3rd candle. See my dedicated IOFED guide.

Where do I place the stop loss on an FVG trade?

Beyond the FVG far edge or beyond the lower-timeframe MSS swing extreme, with a small buffer. Not at the FVG boundary itself.

Where do I take profit?

The next draw on liquidity — old high or low, relative equal level, or the next higher-timeframe PD array.

What timeframe is best for FVG trading?

Mark the higher-timeframe FVG on the daily or 4-hour for the bias. Use the 15-minute or 5-minute FVG for the entry trigger. The 1-minute can be used for very tight scalp entries.

Does FVG work on indices and gold?

Yes — NQ, ES and XAU/USD all produce textbook FVG entries, especially during the New York AM session and around US economic releases. ICT actually introduced FVG using NQ and ES.

What is the difference between FVG and order block?

The FVG is the IMBALANCE between three candles. The order block is the LAST opposing candle before the displacement that produced the FVG. Often you find both in the same setup — the FVG is the zone, the OB is the candle.

Is every FVG tradeable?

No — FVGs in choppy ranges, against the higher-timeframe bias, or without lower-timeframe MSS confirmation should be ignored. Only bias-aligned, displacement-confirmed FVGs are worth trading.

What if price never returns to fill the FVG?

That is a breakaway gap — an FVG held in place by a breaker block, inversion FVG or balanced price range in front of it. See my Breakaway Gap guide for the full breakdown.