Fair value gaps: the inefficiency the market comes back to rebalance
A fair value gap, or FVG, is the clearest form of inefficiency in the ICT toolkit. When price moves so fast that one side of the market barely trades, it leaves a gap across three candles, and the method says the market usually returns to rebalance that gap before continuing. This module shows exactly how to draw the gap, which half of it you care about, and what it means when an FVG is broken and flips. It is the single most used PD array in the later models, so take your time here.
What imbalance is
In a balanced move, buyers and sellers trade at every price on the way up or down. In a fast, one-sided move they do not: price jumps, leaving a band where little two-way trade happened. That band is imbalance, and ICT treats it as unfinished business. The market tends to come back and deliver into it, letting trade happen at the prices it skipped, before carrying on. Imbalance is the footprint of displacement, which is why fair value gaps and strong moves always travel together.
The three-candle fair value gap
An FVG is defined across three candles. For a bullish gap, look at candle one and candle three: if the high of candle one is below the low of candle three, the space between them is the fair value gap, created by a strong candle two. For a bearish gap, the low of candle one sits above the high of candle three. The gap is the exact zone between those two wicks. Draw it as a box and expect price to trade back into it. That return is where entries live.
BISI and SIBI
ICT names the two gaps by what they imply. A BISI, buy-side imbalance sell-side inefficiency, is a bullish FVG: the move up was efficient on the buy-side and left inefficiency below. A SIBI, sell-side imbalance buy-side inefficiency, is a bearish FVG. The labels sound like a mouthful, but they encode direction: a BISI is a bullish array you look to buy from in a bullish draw, a SIBI is a bearish array you look to sell from. Match the gap to your bias, not the other way around.
Consequent encroachment
The midpoint of the gap, the 50 percent level, is called consequent encroachment, and ICT treats it as the part of the gap that matters most. Price often only needs to tag the midpoint, not fill the whole gap, before continuing. For precise entries you can wait for price to reach consequent encroachment rather than the far edge, which gives a tighter stop. If price trades cleanly through the midpoint and keeps going, the gap is weakening as support or resistance.
The inversion fair value gap
When price trades fully through a fair value gap and closes beyond it, the gap inverts: a failed bullish FVG becomes resistance, a failed bearish FVG becomes support. ICT calls this an inversion FVG. It is a powerful tell, because it marks a spot where one side tried to defend an inefficiency and failed, so the roles flip. On a retest from the far side, the inverted gap often holds cleanly and offers an entry in the new direction.
How price returns on gold
Gold leaves clean fair value gaps on session-open bursts and news candles. The useful habit is to mark the gap the moment displacement creates it, then wait for the return rather than chasing the move. Favour gaps that sit in line with your higher-timeframe draw and that formed right after a liquidity raid; a BISI printed just after sell-side was swept is a high-quality long array. Ignore tiny gaps inside chop. The gap is only as good as the displacement that made it.
FAQ
How do I draw a fair value gap?
Use three candles. For a bullish FVG, the gap is the space between the high of the first candle and the low of the third candle, created by a strong middle candle. For a bearish FVG, it is between the low of the first candle and the high of the third. Draw that zone as a box.
What do BISI and SIBI mean?
BISI is buy-side imbalance sell-side inefficiency, which is a bullish fair value gap. SIBI is sell-side imbalance buy-side inefficiency, a bearish one. Use a BISI as a long array in a bullish draw and a SIBI as a short array in a bearish draw.
What is consequent encroachment?
It is the 50 percent midpoint of the gap. ICT treats it as the most important level inside the FVG, because price often reacts there without filling the whole gap. Entering near the midpoint gives a tighter, better-defined stop.
What is an inversion fair value gap?
It is a gap that price has traded fully through and closed beyond. A failed bullish FVG becomes resistance and a failed bearish FVG becomes support. On a retest from the other side it often holds and offers an entry in the new direction.
Does price always fill a fair value gap?
No. Gaps are a tendency, not a law. Strong gaps formed with real displacement, in line with the higher-timeframe draw and after a liquidity raid, are respected more often. Small gaps inside choppy ranges are unreliable and best ignored.