Discussing the article: "The Inverse Fair Value Gap Trading Strategy"
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Check out the new article: The Inverse Fair Value Gap Trading Strategy.
An inverse fair value gap(IFVG) occurs when price returns to a previously identified fair value gap and, instead of showing the expected supportive or resistive reaction, fails to respect it. This failure can signal a potential shift in market direction and offer a contrarian trading edge. In this article, I'm going to introduce my self-developed approach to quantifying and utilizing inverse fair value gap as a strategy for MetaTrader 5 expert advisors.
To fully appreciate the intuition behind an "inverse fair value gap," it helps to start with what a standard fair value gap (FVG) represents. A fair value gap is typically defined within a three-candle price pattern.
A FVG occurs when Candle B’s body (and often wicks) launches the market price abruptly upward or downward in such a way that there’s a “gap” left behind. More concretely, if the low of Candle C is higher than the high of Candle A in a strong upward move, the space between these two price points is considered a fair value gap. This gap reflects a zone of inefficiency or imbalance in the market—an area where trades didn’t get properly two-sided participation because price moved too quickly in one direction. Traders often assume that institutional order flow caused this displacement, leaving “footprints” of big money activity.
The common logic is that price, at some point, often returns to these gaps to “fill” them. Filling the gap can be seen as the market’s way of balancing out the order flow that was previously left one-sided. Traders who follow this principle often wait for price to revisit this gap, looking for a reaction that confirms continuation in the original direction, or sometimes a reversal.
Author: Zhuo Kai Chen