What Is an Inverse Fair Value Gap (IFVG)?
An inverse fair value gap is a fair value gap that price has closed through, after which traders expect the gap to act in the opposite direction. A failed bullish gap becomes a level price may sell from on a retest, and a failed bearish gap becomes one it may buy from.
Covered on this page: TradingView and LuxAlgo.
A fair value gap is normally treated as a level price should respect. The inverse version is what traders do with one that did not hold, and it turns a failed idea into a new one.
How it forms
Start with an ordinary fair value gap. Three candles, where the first candle’s high sits below the third candle’s low, leaving a band of prices only the middle candle traded through. In the bullish case, the expectation is that price will come back into that band and find buyers.
Then price closes through it. Instead of bouncing, a candle falls through the whole gap and its body closes below the gap’s lower edge. The buyers the gap was supposed to hold have not shown up.
Now the gap is read the other way. The same band is watched from underneath. If price rallies back up into it, an inverse fair value gap trader expects sellers there, because the level has flipped from support to resistance.
The bearish case is the mirror. A bearish gap that price closes above becomes a level to watch for buyers when price dips back into it.
The same idea you already know
This is the flip from support and resistance, applied to a gap. A broken floor becoming a ceiling is one of the oldest observations in chart reading. The inverse fair value gap uses the gap’s edges as the floor instead of a horizontal line.
It is also close to a breaker block. A breaker is an order block that failed and is then used from the other side. The inverse gap does the same thing with a fair value gap.
They often overlap. On many charts the failed order block and the failed gap sit in the same place, so the two names can describe one event.
Where the definitions differ
The name. Michael J. Huddleston, who teaches as ICT, calls it an inversion fair value gap. Most videos and scripts shorten it to IFVG, and inverse fair value gap has become the common search term. They mean the same thing.
What counts as failing. The strict version needs a candle body to close beyond the far edge of the gap. Looser versions accept any close beyond the edge, and a few accept a wick through the gap. The strict rule produces fewer inversions; the loose one produces more, and more false ones.
Whether the close must be forceful. Some teachers only count an inversion when the candle that closes through is a wide one, which ties it to displacement and a market structure shift. Others take any close.
How long it stays valid. Some traders use only the first retest; others keep the level live until price closes back through it the other way.
It is not a balanced price range. A balanced price range is where a bullish gap and a bearish gap overlap. It is a separate ICT idea that shows up in the same videos, and the two are easy to mix up.
A worked example
Take a hypothetical bullish fair value gap where candle one’s high is $75.55 and candle three’s low is $75.95. The gap is the 40-cent band between them.
Price rallies away, then comes back. A candle opens at $76.10 and closes at $75.30. Its body closed 25 cents below the lower edge of the gap ($75.55 minus $75.30). Under the strict rule, the gap has failed.
Wait for the retest. A later rally trades up to $75.80, inside the band. That is the moment an inverse gap trader looks for a short. Nothing has been proven yet; the retest is only the location.
Fix the invalidation first. If price closes above the top of the gap at $75.95, the inversion is wrong. A short near $75.80 is then risking 15 cents plus spread ($75.95 minus $75.80), and that small distance is the main attraction of the setup.
Name the target before entering. The obvious one is the low that formed after the close through the gap. Without a target written down, a 15-cent risk tells you nothing about whether the trade is worth taking.
The original data
In our study of 24,971 trading videos, 29 titles cover the inverse fair value gap, from 23 channels. The median one gets 13,586 views, 9 pass 50,000, and the median length is 13.0 minutes. The largest, a Booming Bulls video on fair value gaps and the inverse version, has 836,848 views.
The parent topic is about seven times larger. 209 titles in the same study name a fair value gap, with a median of 22,563 views, so the inverse version is a smaller, later branch of the same subject.
The naming split shows how new the term is. Of the 29 titles, 16 use only the letters IFVG, 7 say inverse, 5 say inversion and 1 says inversed. Anyone searching a single spelling misses most of the material.
When it fails
Price reclaims the gap
The common failure is a second reversal. Price closes through the gap, retests it from underneath, and then closes back above it. The original bullish gap was right after all, only late, and the short taken on the retest is stopped out.
Two failures in a row
An inverse gap is a bet that one failure leads to the opposite move. The gap has already shown it can fail, and nothing in the pattern says the second read is more reliable than the first.
The rule moved after the fact
Because wick, close and body-close versions all exist, a chart can almost always be found where one of them worked. Testing the idea honestly means picking one rule and counting every case, not only the retests that turned.
Too many gaps
Every fast candle leaves a gap, and every gap that fails becomes a candidate inversion. On a one-minute chart that is dozens of levels a day, and a level on every chart is not information.
Related
The fair value gap page covers the three-candle test itself, including the bearish version, and every inversion starts there.
A breaker block applies the same failed-level logic to an order block, and the two often sit in the same spot.
And support and resistance is where the flip idea comes from, with the evidence for and against it.
Write down the exact rule for a failed gap before you look at a chart, body close or wick, and keep it. If you decide afterwards which closes counted, every inverse gap on a finished chart will look like it worked.
— Michael Whitman
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