Anticipating Breakaway Gaps with Inversion Fair Value Gaps

Understanding how inversion fair value gaps signal when fair value gaps should stay open

Definition

INVERSION FAIR VALUE GAP 0:31-0:33

"look at that inversion fair value Gap"

Core Teaching

0:33-0:40

"if you ever have an inversion fair value Gap and here's for your notes folks if you have an inversion fair value Gap like that"

The Bodies vs Wicks

0:13-0:24

"that's the narrative that's the the real story is in the the bodies the Wicks do the damage yes we Wicked through it but look where it closed we traded down look at the bodies Clos right there that's consequent encroachment that's the midpoint of that Gap"

Price Level Reference

0:25-0:31

"so 4182 and a quarter the open on this is 4182 and a quarter"

Market Context

Large Consolidation Setup

0:00-0:09

"we're in a large consolidation here buy side here the market rallies up creates another area of equal highs it drops back down where is it dropping down into inefficiencies here"

Dealing Range

0:42-0:47

"you have a fair value Gap that's just below that level inside of your uh dealing range meaning you have this low to that high"

Bullish Bias

0:47-0:53

"this inversion fair value Gap we would want to see it trade through that because we're bullish buy side it rallies through it"

Structure & Pattern

Inversion Fair Value Gap Pattern Price Consolidation Drop to FVG Rally Buy Side Equal Highs (Buy Side Liquidity) Fair Value Gap Inversion FVG Consequent Encroachment (Midpoint) Body closes at CE ← This area should stay open → Algorithm Spools Buy Side Taken

Reading the Bodies

0:11-0:14

"look real close you see that right there look at the bodies of the candles"

Signature Pattern - When Fair Value Gaps Should NOT Close

The Key Question

0:53-0:59

"we expect ICT tell me how to know when the fair value gaps shouldn't close in here's one of those signatures"

The Signature Answer

0:59-1:06

"inversion fair value app all this area should stay open or a portion of it should stay open okay"

TWO ACCEPTABLE CONDITIONS 2:30-2:40

"we have an inversion fair value Gap here that's going to support price if we get a signature showing that either one of these conditions occur a body closes at the high or closes at the consequent encroachment"

Condition 1: Body Closes at High

1:26-1:30

"is there any body closing at the high no"

Condition 2: Body Closes at Consequent Encroachment

1:30-1:40

"we do have a body close right here on this candle at the consequent encroachment as soon as it does that we now can trust that this area here should not be traded down into"

1:41-1:44

"technical science baby take notes"

Entry Rules

Two Student Approaches

APPROACH 1: MULTIPLIER ENTRY 1:11-1:18

"some of you would see this entry in this shaded area here as their multiplier meaning that they would go long when price dropped into it right there"

APPROACH 2: PROOF WITH BODIES 1:18-1:28

"other students would see this and say okay I want to see it show me proof with the bodies respecting either consequent encroachment or the high of the fair value got"

Institutional Order Flow Entry Drill

2:15-2:27

"specifically what kind of Entry would that be institutional orderful entry drill meaning that you're only needing it to go to that level or just below it of this fair value Gap"

Trust Condition

2:25-2:30

"trusting because we have an inversion fair value Gap here that's going to support price"

Algorithm Logic

Algorithm Response to Signature

2:40-2:49

"as soon as that happens as that happens the algorithm will immediately spool and go the other direction and aim for delivery to the upside"

Target Destination

2:49-2:53

"going after buy side or inefficiency above old highs"

Immediate Rebalance Confirmation

2:57-3:04

"open immediate rebound BCE bang hits it if you get an immediate rebalance you know where it's going to go"

Practical Rules

RULE 1: BUY SIDE LIQUIDITY POOL 2:06-2:10

"this area here would be a buy side liquidity pool okay"

RULE 2: FIRST PARTIAL TARGET 2:10-2:15

"so that would be a first partial if a student would use this entry on this fair value Gap"

RULE 3: NOT A SHORT SETUP 1:51-2:04

"folks that just simply watch one of my videos and they see the relative equal highs and relative equal lows that we like to Target we don't look at this as we can trust this as a short we want to see something that's going to be at a later time used as a long to go right back there and Target those individuals"

Higher Time Frame PDR

3:12-3:17

"when you have a higher time frame PDR that has yet to be traded to"

Equal Highs Decision Logic

3:06-3:12

"how do you know when it's going to take out relative equal highs and reverse or when it's going to keep continuing"

Holding for Higher Prices

3:17-3:24

"so I'm not going to look at these equal highs being traded to and then reject and go lower that's just a partial and I'm holding on looking for higher prices and running into you know higher prices still"

Study & Review

Click each card to reveal the answer (from transcript quotes)

What is the real story in the candles according to ICT?
"that's the narrative that's the the real story is in the the bodies the Wicks do the damage yes we Wicked through it but look where it closed" (0:14-0:21)
What is consequent encroachment?
"that's consequent encroachment that's the midpoint of that Gap right there" (0:23-0:25)
What is the signature that tells you when fair value gaps should NOT close?
"inversion fair value app all this area should stay open or a portion of it should stay open" (0:59-1:06)
What are the two acceptable body close conditions that confirm the signature?
"either one of these conditions occur a body closes at the high or closes at the consequent encroachment" (2:32-2:40)
When you get the signature conditions, what does the algorithm do?
"the algorithm will immediately spool and go the other direction and aim for delivery to the upside going after buy side or inefficiency above old highs" (2:42-2:53)
What is the Multiplier entry approach?
"some of you would see this entry in this shaded area here as their multiplier meaning that they would go long when price dropped into it right there" (1:11-1:18)
What is the Proof with Bodies approach?
"other students would see this and say okay I want to see it show me proof with the bodies respecting either consequent encroachment or the high of the fair value got" (1:18-1:28)
What kind of entry is this using the fair value gap with inversion support?
"institutional orderful entry drill meaning that you're only needing it to go to that level or just below it of this fair value Gap" (2:17-2:25)
Should you look at equal highs as a short opportunity in this context?
"we don't look at this as we can trust this as a short we want to see something that's going to be at a later time used as a long to go right back there and Target those individuals" (1:56-2:04)
How do you know when equal highs will be taken out and continue vs reverse?
"when you have a higher time frame PDR that has yet to be traded to" (3:12-3:17)
What confirms that price will continue higher after taking out buy side?
"if you get an immediate rebalance you know where it's going to go" (3:01-3:04)
What is the target for the first partial?
"this area here would be a buy side liquidity pool okay so that would be a first partial" (2:06-2:12)