What Is an Inversion Fair Value Gap (IFVG)?

An Inversion Fair Value Gap (IFVG) is a price-action concept commonly used by Smart Money Concept (SMC) and ICT traders. IFVGs help traders identify potential trend reversals, continuation zones, and high-probability entry or exit areas. A bullish IFVG is typically used to look for long trades, while a bearish IFVG is used for short setups. An IFVG forms when an existing Fair Value Gap (FVG) is invalidated by price action, either through a candle wick or a candle close. This invalidation often signals a shift in market momentum, suggesting that the prior directional bias may be weakening or reversing.

Before learning IFVGs, it is important to fully understand Fair Value Gaps, as IFVGs are built directly from them.

How to Identify an Inversion Fair Value Gap ?

Bullish Inversion Fair Value Gap (IFVG)

A bullish IFVG originates from a bearish Fair Value Gap. When price moves back into this bearish FVG and then breaks above it either by a wick or a candle close the gap becomes inverted and is reclassified as a bullish IFVG. When price later retraces into this bullish IFVG zone, it can be used as a potential long entry area. If price moves below the lower boundary of the bullish IFVG, the zone is considered invalid and should no longer be used for trading decisions.

Bearish Inversion Fair Value Gap (IFVG)

A bearish IFVG is formed from a bullish Fair Value Gap. Once price returns to the bullish FVG and breaks below it via a wick or candle close the original gap flips into a bearish IFVG. When price revisits this bearish IFVG, it may act as a short entry zone. If price breaks above the upper boundary of the bearish IFVG, the setup becomes invalid and should be ignored.

Trading Strategy Using Inversion Fair Value Gaps

Based on the chart, NZD/USD initially shows a strong bearish trend, guided by a descending trendline and consistent lower highs and lower lows. During this bearish phase, price created multiple fair value gaps (FVGs) as it moved aggressively downward, indicating strong imbalance and institutional momentum. As price approached the lower range, selling pressure weakened and the market formed a base, followed by a sharp bullish impulse. This impulsive move broke the descending trendline, signaling a market structure shift from bearish to bullish. The bullish impulse also created a new fair value gap to the upside.

After the breakout, price retraced back into the previously bearish fair value gap zone. Once price closed above this zone, the original bearish FVG became an Inversion Fair Value Gap (IFVG). This inverted zone then acted as support, where price respected the level and continued moving higher.

The highlighted trade setup shows price retesting the IFVG, holding above it, and then continuing in the bullish direction. The stop loss is placed just below the inverted zone, while the take profit targets the higher liquidity area and previous highs. This provides a clean structure-based entry with a favorable risk-to-reward ratio.

Toward the right side of the chart, price consolidates above the IFVG, confirming that the inverted fair value gap is holding as a strong support level. This behavior reinforces the concept that IFVGs are high-probability continuation zones when aligned with a market structure shift.

Best Timeframes for Trading IFVGs

Inversion Fair Value Gaps can be traded across all timeframes, whether you are scalping, day trading, swing trading, or investing. However, higher timeframes generally produce more reliable and consistent signals than lower timeframes. Using multiple timeframe analysis is highly recommended, as it allows traders to align lower-timeframe entries with higher-timeframe market structure and trend direction.

Fair Value Gap vs Inversion Fair Value Gap

A Fair Value Gap is a price imbalance created by a three-candle formation, where the wicks of the first and third candles do not overlap the body of the middle candle. This unfilled price range highlights inefficiency in the market.An Inversion Fair Value Gap forms when this original FVG is later invalidated by price action, either through a wick or candle close, causing the zone to flip its directional bias.

How to Avoid Low-Quality IFVG Trades

Consistency with IFVG trading comes from confluence. Traders should avoid entering positions simply because price touches an IFVG. Instead, IFVGs should be combined with other confirmations such as liquidity grabs, breaker blocks, market structure alignment, or overall trend direction. Using multiple confirmations helps filter out low-probability setups and improves overall trade quality.