Fair value gaps the ICT way
Lesson 06 · 5 min read · By DT Terminal
BISI and SIBI, consequent encroachment as a rule on candle bodies, gaps as both targets and entries, volume imbalance, inversion gaps and the balanced price range.
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BISI and SIBI
Day 12 taught the three candle pattern. ICT names the two directions:
- BISI, Buyside Imbalance Sellside Inefficiency: a bullish gap, read as support on a retracement.
- SIBI, Sellside Imbalance Buyside Inefficiency: a bearish gap, read as resistance.
ICT marks a gap from candle 1's wick to candle 3's wick. Some traders use bodies; this lesson uses wicks.
Raw three candle gaps print all the time. ICT focuses on gaps left by displacement that broke structure or followed a sweep, and on gaps inside the windows from The ICT clock.
Go deeper
Session variants also exist, such as the first gap after the 09:30 New York index open.
Consequent encroachment: the decision line
Consequent encroachment (CE) is the gap's 50% line. ICT uses it as a decision line, and only candle bodies count:
- Held: no body closes beyond CE. Wicks past it are fine.
- Weakened: a body closes beyond CE, still inside the gap.
- Invalid: a body closes beyond the far edge.
Fair value gaps
Held, weakened and invalid, BISI and SIBI
- Fair value gap
- Consequent encroachment, 50%
BISI
bullish: candle 3 low above candle 1 high
SIBI
bearish: candle 3 high below candle 1 low
Held
a wick past CE, but the body closes above it
Weakened
a body closes beyond CE, inside the gap
Invalid
a body closes beyond the far edge
Worked example
Example 01: EURUSD H1: a BISI that held at CE
The worked example, with every number walked through, is in the app.
Go deeper
Times are New York time, EDT. The 11:00 candle opens at 1.09050 and closes at 1.09480. Candle 1's high and candle 3's low leave the BISI.
Had the 15:00 body closed at 1.09090, below the gap, the BISI would be invalid and an inversion candidate.
A target and an entry
In ICT an unfilled gap is also internal range liquidity: a target price may be drawn to, as in Liquidity the ICT way. As an entry, it is usually written as:
- Only after a sweep and a market structure shift.
- A limit at the near edge or CE, in the gap's direction.
- The stop beyond the displacement's swing, not just beyond the gap.
- The target at opposing liquidity.
No peer-reviewed study shows these gaps are revisited more than chance, or that CE works as a decision level. Test each rule.
Tag gap trades by what the gap had done
Go deeper
The Intensive used gaps mainly as entries; ICT also uses them as targets. Traders rank fresh gaps first, then gaps in a killzone, then gaps that agree with the higher timeframe draw. Many gaps never fill. Once you have a few dozen tagged trades, filter by those tags and by Outcome to compare them.
Volume imbalance
A volume imbalance is a gap between two bodies only. Two candles in a row whose bodies do not overlap, while their wicks do. It is smaller than a fair value gap, and it shows up most where markets open with a jump, such as index opens.
Fair value gaps
A fair value gap next to a volume imbalance
- Fair value gap
- Volume imbalance
Fair value gap
wicks of candles 1 and 3 do not overlap
Volume imbalance
two bodies do not overlap; the wicks do
Bullish
in a move up
Bearish
the same, upside down
Inversion: a body close through
The Intensive's inverted gap becomes the inversion fair value gap (IFVG): a failed BISI is used as resistance, a failed SIBI as support.
The confirmation is a candle body closing beyond the far edge. A wick through it is not an inversion.
Worked example
Example 02: NAS100 M5: a BISI that inverts
The worked example, with every number walked through, is in the app.
The plan in full
Times are New York time. The 10:40 body closes at 18,201.
A plan written on it: a short limit at 18,212 in the lower part of the old gap, a stop at 18,232 above it (20 points), and the session low at 18,160 as the target (52 points, 2.6R). Price reaches it by 11:30.
Balanced price range
A balanced price range (BPR) forms when a sharp move and a sharp reversal pass through the same prices, leaving a SIBI and a BISI that overlap. Mark only the overlap. Drawing the whole span of both gaps is the common mistake.
Fair value gaps
Mark the overlap, not the union
- The two gaps
- Balanced price range
Balanced price range
a SIBI on the way down, a BISI on the way back up
The overlap
only the prices both gaps share
Not the union
both gaps together is too wide
Grade gaps in the backtester first
NAS100 on M5. Mark every displacement gap with the rectangle tool and draw its CE. Before you press play, write held, weakened or invalid for the next return, then check how often each one happened.Check yourself
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