FVG Basics Recap
A Fair Value Gap is a 3-candle pattern where the middle candle's body is so large that the wicks of candles 1 and 3 don't overlap — creating a gap in 'fair' price where no trading occurred. These gaps represent institutional imbalance and price tends to return to fill them.
Consequent Encroachment (CE)
The 50% level of any FVG. This is the most important level within a gap. When price reaches the CE of an FVG, approximately 70% of the time it reacts. Many institutional traders place their limit orders at the CE rather than the edge of the FVG for better fills.
FVG Inversion
When an FVG is completely filled and price closes beyond it, the gap 'inverts' and acts in the opposite direction. A bullish FVG that gets completely filled and broken to the downside becomes bearish resistance. Inversions are powerful because they show where institutional intent changed.
Partial Fill vs Complete Fill
If price enters an FVG but reverses before reaching the CE, it's a partial fill — the gap is still valid and may be retested. If price reaches the CE and reverses, the most significant institutional orders were filled. If price completely fills the gap, the institutional imbalance has been resolved.
Using FVGs as Dynamic Levels
Unfilled FVGs act as magnetic zones — price is drawn to them. In trending markets, stack FVGs in the direction of the trend to identify the strongest institutional bias. Quantum Algo tracks FVG mitigation status in real time, showing you which gaps are still active and which have been filled.
Time Decays an FVG's Relevance
Freshness matters. A fair value gap is most likely to be respected soon after it forms, while order flow still "remembers" the inefficiency. The longer price ignores a gap, the more stale and less reliable it becomes. Prioritise recent, untested gaps over old ones buried under newer structure — age is information.
The FVG Confluence Hierarchy
Not all gaps deserve equal weight. Rank them: a higher-timeframe FVG overlapping an order block in the correct premium or discount zone is a top-tier level; a lower-timeframe gap with no other confluence sits at the bottom. The more independent reasons stack on the same price, the more confident the entry — but two or three strong reasons beat a pile of weak ones.
Frequently asked questions
What is consequent encroachment in trading?
Consequent encroachment is the 50 percent midpoint level of a Fair Value Gap. It is the most significant level within any FVG because approximately 70 percent of FVGs react at this level. Many institutional traders place limit orders at the CE for optimal fills.
What happens when an FVG inverts?
When an FVG is completely filled and price closes beyond it, the gap inverts and acts in the opposite direction. A bullish FVG becomes bearish resistance after inversion. This shows where institutional intent shifted and creates a new high-probability level.