Fair Value Gaps and Inverse FVGs (iFVG)
The three-candle imbalance explained: how FVGs rebalance, how gaps invert into iFVGs, and how to stack them with order blocks for Rule 5 entries.
The three-candle imbalance
A fair value gap (FVG) is a three-candle imbalance: when the wicks of the first and third candle do not overlap, price moved so fast that one side of the trade never got filled at those prices. The market is magnetically drawn back to rebalance that inefficiency.
Gaps created by the displacement after a sweep are the ones worth marking. An FVG born from real institutional urgency rebalances and holds; a gap from choppy drifting gets traded straight through.
Rebalance, fill, or invert
Price returning into the gap to tap its midpoint is a rebalance — the classic FVG entry, with the far side of the gap as invalidation. A full fill that closes through means the gap has failed as support.
That failure creates the inverse FVG (iFVG): a gap that once acted as support flips to resistance (or vice versa) once traded through. The retest of the broken gap from the other side is one of the most reliable continuation entries in the playbook.
Stacking models
Rule 5 doesn't ask you to choose one model — it asks for a defined model with a defined invalidation. The best entries are stacks: an order block that contains an FVG, in discount, after a swept low and an MSS. Each layer tightens the entry and shrinks the stop.
In the journal, all of them — OB, FVG, iFVG — count under Rule 5, Entry Model. Log which you used in the notes; after enough trades, your own data will tell you which model pays you best.
Common questions
Do FVGs work on all timeframes?+
They form on every timeframe, but gaps on the 5m and 15m after a liquidity sweep carry the most weight intraday. Gaps on the 1m are mostly noise unless stacked with a larger model.
Is an FVG the same as an imbalance?+
Yes — imbalance is the broader term for any inefficient delivery; the FVG is the standard three-candle pattern used to trade the rebalance.
Related lessons
7 min read
Order Blocks: The Last Candle Before the Move
What a valid order block is, why the impulse behind it matters, and how to place your stop-loss using the order block as your point of invalidation.
8 min read
The Complete 5-Minute Entry Checklist and Execution
The final execution layer: refining the entry on the 5-minute, stop placement, invalidation, minimum risk-to-reward, and the complete pre-trade checklist.
