Inverse fair value gap in gold trading

An inverse fair value gap (IFVG) is a fair value gap that has failed. When price closes fully through a bullish gap, the gap is “inverted” and traders expect it to act as resistance on a return from below. When price closes through a bearish gap, it may act as support. It is the gap equivalent of a breaker block or of support turning into resistance.

How it applies to gold trading

Gold often reverses sharply after sweeping liquidity, closing through the last gap that formed in the old direction. That inversion is a sign that order flow has changed. A common ICT entry is to wait for price to retrace into the inverted gap and enter in the new direction, with a stop beyond the gap.

The setup depends on a decisive close through the gap. A wick through it does not count, and on choppy days gaps are crossed back and forth without meaning.

Worked example

Example (hypothetical numbers): a bullish FVG from 4,015 to 4,021 forms during a rally. After gold sweeps the high at 4,040, it drops and a 15-minute candle closes at 4,012, below the gap. Gold retraces to 4,019, into the inverted gap, and a trader sells at 4,018 with a stop at 4,024 ($6), targeting 3,995.

A common mistake

Treating every gap that is touched as inverted. Inversion requires a body close beyond the gap.

See also: Fair value gap, Breaker block, Balanced price range, CHoCH.

Frequently asked questions