**Understanding Fair Value Gaps (FVG) - ICT Concepts — Transcript & Summary | SozAI**
Source: https://sozai.app/transcript/understanding-fair-value-gaps-fvg-ict-concepts/

TTrades explains Fair Value Gaps (FVG) in ICT concepts: how to identify them, Bisi and Sibi imbalances, consequent encroachment, and when a gap is invalidated or inverted.

## Key Takeaways

- A Fair Value Gap forms when the first and third candles of a three-candle sequence do not overlap.
- Bisi and Sibi describe bullish and bearish fair value gaps based on which side of liquidity was offered.
- Consequent encroachment (50%) is central to judging whether a gap holds or is invalidated.
- A gap is invalidated when price closes through the consequent encroachment without respecting it.
- Inverted gaps can later serve as support or resistance.

## What the video covers

- A Fair Value Gap is a three-candle pattern where the first candle's low (or high) does not overlap with the third candle's high (or low).
- A Bisi (buy-side imbalance) is a bullish FVG where buy-side was offered but sell-side was not, creating inefficiency.
- A Sibi (sell-side imbalance) is a bearish FVG where sell-side was offered but buy-side was not, creating inefficiency.
- The video contrasts true FVGs with non-examples where the candle ranges overlap and no gap exists.
- Consequent encroachment is the 50% level of the fair value gap and is a key reference point for price reaction.
- Three things are watched within a FVG: the start of the gap, the consequent encroachment, and the full fill of the gap.
- A FVG is considered invalidated when price closes through the consequent encroachment rather than respecting it.
- FVG inversion occurs when a gap fails and price closes through it, causing the gap to act as support or resistance in the opposite direction.
- Examples show Sibi and Bisi gaps being respected or failing, with price continuing in the expected direction after valid reactions.
- The video notes that FVG inversion does not need to happen back to back and gives an example where an old Bisi later acts as resistance.

## Chapters

1. 00:00 Introduction and Video Overview
2. 01:06 Defining a Fair Value Gap
3. 02:04 What Is Not a Fair Value Gap
4. 03:08 Examples of Finding Fair Value Gaps
5. 04:09 Bisi and Sibi Explained
6. 05:06 Consequent Encroachment and Invalidation
7. 06:06 Fair Value Gap Inversion
8. 07:15 Inversion Timing and Final Example

Answers

## Questions about this video

What is the difference between a Bisi and a Sibi?

A Bisi is a bullish fair value gap where buy-side was offered but sell-side was not, creating an inefficiency. A Sibi is a bearish fair value gap where sell-side was offered but buy-side was not.

How does the presenter decide a fair value gap is invalidated?

He invalidates a fair value gap when price closes through the consequent encroachment, the 50% level of the gap, because price is not respecting that level and often will not reverse back.

What is Fair Value Gap inversion?

Inversion occurs when a fair value gap fails and price closes through it, after which the gap can act as support or resistance in the opposite direction, as shown with an old Bisi acting as resistance.

## Full Transcript — Download SRT & Markdown

00:03

Speaker A

foreign

00:23

Speaker A

on the difference between a fair value Gap a volume and balance and a gap the first thing we are going to go over is what is a fair value Gap a fair value Gap is a three Candlestick pattern where the first candle low

00:36

Speaker A

[Music]

00:48

Speaker A

candle slow and drag it out and this candle's high and drag it out because this high does not overlap with this low this is now a fair value cap going over to this example this Candlestick high does not overlap with

01:06

Speaker A

How's it going everyone? This video is going to be over Fair Value Gaps. What is a Fair Value Gap? What is a Bisi? What is a Sibi? What is Consequent Encroachment, as well as Inversion? We will also touch on the difference between a Fair Value Gap, a Volume Imbalance, and a Gap.

01:22

Speaker A

to here let's drag the high and low across and see if there is a gap when dragging the high and low across you can see that they overlap the low from the first candle is lower than the high of

01:34

Speaker A

The first thing we are going to go over is what is a Fair Value Gap. A Fair Value Gap is a three-candlestick pattern where the first candle's low does not overlap with the third candle's high, or where the first candle's high does not overlap with the third candle's low. Let's take a little bit of a deeper look into that. If we take a look at this candle, slow it down and drag it out, and this candle's high, and drag it out, because this high does not overlap with this low, this is now a Fair Value Gap.

01:48

Speaker A

High and the third candle slow meaning there is no fair value Gap here so just to clarify a gap between the first candles low and the third candle is high or the first candle's High and the third candle's low is what creates a fair

02:04

Speaker A

Going over to this example, this candle's high does not overlap with this candle's low, so this is also a Fair Value Gap. Now that you understand what a Fair Value Gap looks like, what doesn't it look like? If we were to extend this candle's low down to here, and this candle's high up to here, let's drag the high and low across and see if there is a gap. When dragging the high and low across, you can see that they overlap. The low from the first candle is lower than the high of this third candle, so there's no gap there, and this is not a Fair Value Gap.

02:19

Speaker A

and this candle is high and that creates a fair value Gap now if you notice do we have another one yes because this candle's low does not overlap with this candle's high so now we get an aggressive move in the opposite

02:33

Speaker A

Similarly, over here, if we were to extend this high up and this low down, you can see that there is overlap between the first candle's high and the third candle's low, meaning there is no Fair Value Gap here. So, just to clarify, a gap between the first candle's low and the third candle's high, or the first candle's high and the third candle's low, is what creates a Fair Value Gap.

02:52

Speaker A

side imbalance thy side inefficiency what does that mean it means that sell side was offered but buy side wasn't so it is inefficient or simply put a bearish fair value Gap a busy is a buy side inbounds sell side inefficiency

03:08

Speaker A

Let's go over a few examples of finding Fair Value Gaps. If you look right here, we have our first candle's low; extend that out, and our third candle's high; extend that out. There is a gap between this candle's low and this candle's high, and that creates a Fair Value Gap. Now, if you notice, do we have another one? Yes, because this candle's low does not overlap with this candle's high, so now we get an aggressive move in the opposite direction. Looking at this candle right here, one, two, three, this candle's high does not overlap with this candle's low, which creates another Fair Value Gap.

03:21

Speaker A

is offered but by side is inefficient so this creates a city now if we move over here and let this play out you can see price made a bullish fair value Gap here or a busy because it offered buy side but not sell

03:39

Speaker A

The next thing we are going to go over are Sibis and Bisis. A Sibi is a sell-side imbalance, a sell-side inefficiency. What does that mean? It means that sell-side was offered but buy-side wasn't, so it is inefficient, or, simply put, a bearish Fair Value Gap. A Bisi is a buy-side imbalance, a buy-side inefficiency. This means that buy-side was offered but sell-side wasn't, so it is inefficient, or a bullish Fair Value Gap.

03:55

Speaker A

start of the fair value cup the second being the consequent encroachment or the 50 of the fair value Gap and lastly where price completely fills the fair value Gap when price returns to the fair value Gap I want to see a few different

04:09

Speaker A

So if we look at this price section right here, we have a bearish Fair Value Gap, where sell-side is offered but buy-side is inefficient, so this creates a Sibi. Now, if we move over here and let this play out, you can see price made a bullish Fair Value Gap here, or a Bisi, because it offered buy-side but not sell-side. And there we go, there's an example of a Sibi and a Bisi, and I hope that clarifies some things for you guys.

04:23

Speaker A

long as it's respecting the consequent encroachment I'm pretty flexible with that it can also reach up build a fair value Gap and with this I prefer to see price close outside the consequent encroachment of this fair value Gap the

04:37

Speaker A

There are three things that I look for within a Fair Value Gap: the first being the start of the Fair Value Gap, the second being the Consequent Encroachment, or the 50% of the Fair Value Gap, and lastly, where price completely fills the Fair Value Gap. When price returns to the Fair Value Gap, I want to see a few different things. One, price can either reach up into this Fair Value Gap, close out, and continue lower. You can also reach up into the Consequent Encroachment of this Fair Value Gap. From here, I would like to see a candle close outside of it, but as long as it's respecting the Consequent Encroachment, I'm pretty flexible with that. It can also reach up, build a Fair Value Gap, and with this, I prefer to see price close outside the Consequent Encroachment of this Fair Value Gap.

04:51

Speaker A

will not reverse back down going back to our previous example we have a city right here let's mark out the consequent encroachment and see what happens so you can see when we reach up into this fair value Gap price does not close

05:06

Speaker A

The one thing I look for when I'm invalidating a Fair Value Gap is this: when we start to close over the Consequent Encroachment, or outside of the Fair Value Gap, price is not respecting that, and a lot of times price will not reverse back down. Going back to our previous example, we have a Sibi right here. Let's mark out the Consequent Encroachment and see what happens. You can see when we reach up into this Fair Value Gap, price does not close over the Consequent Encroachment.

05:21

Speaker A

invalidate a fair value Gap because price is not respecting it now if we take a look at this busy right here and Mark out the consequent encroachment let's see what happens price reaches into the fair value Gap closes out so

05:36

Speaker A

Now, for example, let's take a look at this Sibi right here, marking out the Consequent Encroachment. You can see that price did not respect this Sibi at all and closed right through it. This is when I will invalidate a Fair Value Gap, because price is not respecting it.

05:52

Speaker A

consequent encroachment close outside of here and get a continuation higher the next thing we're going to look at is fair value Gap inversion and what that is is winning fair value Gap fails or Price closes through it this fair value

06:06

Speaker A

Now, if we take a look at this Bisi right here and mark out the Consequent Encroachment, let's see what happens. Price reaches into the Fair Value Gap and closes out, so it's currently respecting it. However, if we take any discount and premium of this range, I would like to have it reach a little bit lower, to a discount of the range. Here, price, you can see, touched the Consequent Encroachment, closed outside of here, and got a continuation higher.

06:20

Speaker A

bissy use it as resistance and move away one thing is that this doesn't need to occur back to back or these fair value gaps don't have to overlap this can occur later on after a period of consolidation going back to this previous example we

06:36

Speaker A

The next thing we're going to look at is Fair Value Gap Inversion, and what that is, is when Fair Value Gaps fail, or price closes through them. This Fair Value Gap can then be used as support or resistance. So I would expect price, if it does return to this old Sibi, to use it as support and move away, and over here, if it returns to this old Bisi, use it as resistance and move away. One thing is that this doesn't need to occur back to back, or these Fair Value Gaps don't have to overlap. This can occur later on, after a period of consolidation.

06:57

Speaker A

does not need to occur back to back so as we watch this play out our first clue is that this close below the consequent encroachment we cannot displace back out hit this Wick right here come back in let's see if we can close below the fair

07:15

Speaker A

Going back to this previous example, we have a Sibi right here. Price closes through it. I can then look to see if this Sibi supports price, which it then does, before getting a move higher. Here's an example of what I mean when I say that Fair Value Gap Inversion does not need to occur back to back. As we watch this play out, our first clue is that this close below the Consequent Encroachment. We cannot displace back out, hit this wick right here, come back in. Let's see if we can close below the Fair Value Gap. And right here, we get a close below the Fair Value Gap. Extending this out, let's see what happens when price returns to this. You can see price returns to this Bisi, this old Bisi, and it then uses it as resistance to go lower.

07:36

Speaker A

resistance to go lower for our next example we have a sibi right here so let's see how price reacts to it and you can see we filled this fair value Gap and price closes out of it so it's currently respecting it

07:52

Speaker A

For our next example, we have a Sibi right here, so let's see how price reacts to it. You can see we filled this Fair Value Gap and price closes out of it, so it's currently respecting it. It takes sell-side liquidity, comes back up, still respecting the Sibi as it closes out of it. It takes sell-side liquidity again, comes back up, still respects it. We open up, and right here we close over the Sibi. Extending this out in time, let's see what happens when price returns. You can see how the Consequent Encroachment was used as support, and then, going even further ahead, we reach into this old Sibi again, use it as support, and get this displacement back out of it.

08:17

Speaker A

extending this out in time let's see what happens when price returns you can see how the consequent encroachment was used as support and then going even further ahead we reach into this Old City again use it as support and get this placement back out

08:40

Speaker A

The last thing we're going to cover in this video is the difference between a Fair Value Gap, a Volume Imbalance, and a Gap. We already discussed what defines the Fair Value Gap, so let's look into a Volume Imbalance and a Gap. A Volume Imbalance is a gap between the closing and opening price of two candles. The difference between a Volume Imbalance and a Gap is that a Gap has a complete absence of trading between two candles, while a Volume Imbalance has trading or overlap between the high and the low.

08:53

Speaker A

hand cap a volume imbalance is a gap between the closing and opening price of two candles and the difference between a volume imbalance and a gap is a gap has a complete absence of trading between two candles while a volume imbalance had

09:09

Speaker A

A quick example of a Volume Imbalance would be from this closing price to this opening price. We have a gap; however, price did trade through these areas, so it is a Volume Imbalance and not a Gap. When price returns, we get a nice reaction from that area. Here is an example of a Gap, where between two candles we have a complete absence of trading.

09:25

Speaker A

not a gap and so when price returns we get a nice reaction from that area and here is an example of a gap or between two candles we have a complete absence of greeting I hope you found this video helpful if you did please

09:42

Speaker A

I hope you found this video helpful. If you did, please consider liking and subscribing, and I hope you have a great rest of your day.

Topics: fair value gap FVG ICT concepts Bisi Sibi consequent encroachment FVG inversion imbalance price action smart money concepts

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