Inversion Fair Value Gaps

This lesson builds directly on Lesson 01: Fair Value Gaps. If you can spot a three-candle gap, you already have everything you need.

Here is what you will be able to do by the end:

In Lesson 01, you learned that an FVG is a three-candle imbalance. An Inversion Fair Value Gap begins when that original gap fails.

Every IFVG starts life as an ordinary FVG. Then price trades through the gap, and the original reading no longer holds. Traders who use this idea may then watch the very same zone from the opposite side.

So what counts as the gap failing? In the framework described here, traders may consider an FVG invalidated when price trades through it, whether by wick or by close.

Many traders are stricter than that. Here are the two versions you will meet most often:

A bullish IFVG starts as a bearish FVG. Follow the sequence:

Now flip everything. A bearish IFVG starts as a bullish FVG.

An IFVG can fail too. For a bullish IFVG, if price trades back completely through the zone in the bearish direction, its bullish reading is weakened or invalidated. For a bearish IFVG, the same happens if price trades through the zone in the bullish direction.

As before, traders draw this line in slightly different places, so treat the exact rule as a choice, not a law.

A commonly described setup pairs three ideas: a liquidity grab, the invalidation of an existing FVG, and the IFVG that results.

Liquidity is a later concept in this course, so we will only sketch it here. Liquidity often refers to areas where clusters of orders may exist around obvious highs or lows. You will study it properly in Lesson 10.

The logic, conceptually: price first reaches beyond an obvious low, then moves sharply the other way. That sharp move can trade through an existing FVG and create an IFVG that traders then watch on the way back. It is one way of organising a chart, not a guaranteed strategy.

The source article this lesson draws on is clear about one thing: don't act just because price touched an IFVG. It suggests looking for confluence, such as a liquidity grab, a breaker block, or the broader market trend.

Anywhere an FVG can. Traders look for them on many timeframes, depending on their style, and the source suggests checking more than one for a broader view.

Higher timeframes may reduce some lower-timeframe noise, while lower timeframes provide more setups. Neither is objectively better. They simply trade off differently.