FVG and Price Imbalance : The Complete Guide to ICT and SMC – Part 7

#What Is an FVG in ICT and SMC?

In ICT (Inner Circle Trader) and SMC (Smart Money Concepts), a Fair Value Gap refers to an imbalance created across a three-candle sequence.

The basic structure consists of:

1. The first candle

2. A strong displacement candle in the middle

3. The third candle

If the wick of the first candle does not overlap with the wick of the third candle, the price range between them forms an FVG.

A Fair Value Gap is therefore based on a three-candle structure.

The size of the gap does not define whether the structure is an FVG. Even a relatively small gap can qualify as long as the structural conditions are present.

#How Does a Bullish FVG Form?

A bullish Fair Value Gap forms when price moves aggressively upward and leaves an untraded or inefficiently traded area between the high of the first candle and the low of the third candle.

The basic condition is:

High of Candle 1 < Low of Candle 3

The area between those two prices becomes the bullish FVG.

#Simple Bullish FVG Example

Assume:

• High of the first candle: 100

• The second candle moves sharply higher

• Low of the third candle: 103

The range between 100 and 103 is not overlapped by the wicks of the first and third candles.

Therefore:

Bullish FVG = 100 to 103

This area represents an upward price imbalance.

#How Does a Bearish FVG Form?

A bearish FVG forms in the opposite way.

Price moves sharply downward, leaving a gap between the low of the first candle and the high of the third candle.

The basic condition is:

Low of Candle 1 > High of Candle 3

The price range between these two levels becomes the bearish FVG.

In both bullish and bearish structures, the key condition is the lack of overlap between the wicks of the first and third candles.

#Does Price Always Have to Fill an FVG?

No.

A common misconception is that once an FVG forms, price must eventually return and completely fill it.

Price may:

• completely fill the FVG;

• enter only part of the gap;

• react from the edge or midpoint;

• or never return to the area at all.

The existence of an FVG does not guarantee that price will revisit it.

An FVG should therefore be treated as an analytical price zone rather than a guaranteed future target.

#What Is BISI?

Buy-Side Imbalance / Sell-Side Inefficiency (BISI) refers to a bullish Fair Value Gap.

It describes a situation where price has been delivered aggressively to the upside, creating buy-side imbalance while leaving sell-side delivery relatively inefficient.

In simple terms:

BISI = Bullish FVG

A useful way to remember it is to associate BISI with bullish displacement.

#What Is SIBI?

Sell-Side Imbalance / Buy-Side Inefficiency (SIBI) refers to a bearish Fair Value Gap.

In this case, price is delivered aggressively to the downside, creating sell-side imbalance while leaving buy-side delivery inefficient.

Therefore:

SIBI = Bearish FVG

BISI and SIBI are not separate concepts from Fair Value Gaps. They describe the directional form of an FVG.

#BISI vs. SIBI at a Glance

Once you understand how to identify an FVG, distinguishing BISI from SIBI becomes much easier.

#What Is BPR?

Balanced Price Range (BPR) is the overlapping area between a bullish FVG and a bearish FVG.

More precisely:

BPR is only the shared price range where two opposing FVGs overlap.

For example, assume a BISI exists between 100 and 104.

Later, a SIBI forms between 102 and 106.

Their shared range is:

102 to 104

That overlapping section is the BPR.

The entire area of both Fair Value Gaps should not be marked as the BPR.

Only the overlapping portion matters.

#Why Is BPR Important?

A Balanced Price Range shows that the same section of price has been involved in imbalanced delivery from both directions.

Because of this, traders may monitor the area for future price reactions.

However, just like an FVG, a BPR should not be treated as a complete trading setup by itself.

#What Is the Difference Between an FVG and a Liquidity Void?

A Liquidity Void refers to a more pronounced gap or discontinuity in price delivery.

This is different from a Fair Value Gap.

With an FVG, price has still moved through the area, but the three-candle structure shows an imbalance because the wicks of the first and third candles do not overlap.

A Liquidity Void can involve a section of price where the market effectively jumps from one level to another without normal price delivery through the entire range.

This may occur more often during:

• market openings after closures;

• stock market gaps;

• highly volatile news events;

• or certain futures market conditions.

#Key Difference

An FVG is a three-candle price imbalance.

A Liquidity Void is a more direct gap in price delivery.

The two concepts should not be treated as interchangeable.

#What Is Volume Imbalance?

Volume Imbalance (VI) in this context refers to a gap between the bodies of two consecutive candles.

It can be identified when the closing price of one candle and the opening price of the next candle do not meet at the same price level.

As a result, a small gap appears between the candle bodies.

Unlike FVG, which requires three candles:

Volume Imbalance is a two-candle structure.

This type of imbalance may be more visible in markets such as futures and may appear less frequently on certain spot forex charts.

#An Important Note About the Term “Volume Imbalance”

In this context, Volume Imbalance refers to a price-structure concept involving candle bodies.

It should not automatically be confused with order-flow or volume-analysis concepts such as Volume Profile or direct measurements of buying and selling volume.

#What Is the Difference Between Volume Imbalance and FVG?

The two structures may look similar at first, but they are defined differently.

The simplest way to distinguish them is:

If you are analyzing three candles and comparing the wicks of the first and third candles, you are looking for an FVG.

If you are examining a gap between the bodies of two consecutive candles, you are looking at Volume Imbalance.

#FVG, BISI, SIBI, BPR, Liquidity Void, and Volume Imbalance Compared

This comparison helps prevent these concepts from being incorrectly grouped together.

#How to Identify FVG and Price Imbalance Step by Step

#Step 1: Find an Aggressive Price Move

Start by looking for a section of the chart where price moves quickly and decisively in one direction.

Strong displacement is often where Fair Value Gaps become easier to identify.

#Step 2: Examine Three Consecutive Candles

Select three neighboring candles.

Compare the wick of the first candle with the wick of the third candle.

#Step 3: Check for Wick Overlap

If the first and third candle wicks do not overlap within a certain price range, that area may form an FVG.

For a bullish FVG:

High of Candle 1 < Low of Candle 3

For a bearish FVG:

Low of Candle 1 > High of Candle 3

#Step 4: Determine the Direction

If the imbalance forms during an upward displacement, it is a bullish FVG or BISI.

If it forms during a downward displacement, it is a bearish FVG or SIBI.

#Step 5: Look for Opposing FVG Overlap

If price later creates an FVG in the opposite direction, compare the two zones.

Any shared area between them can form a Balanced Price Range.

#Step 6: Do Not Confuse a True Gap With an FVG

If price jumps from one level to another with little or no normal price delivery between the levels, the structure may be closer to a Liquidity Void.

#Step 7: Compare Candle Bodies

If there is a gap between the close of one candle and the open of the next candle, the structure may be a Volume Imbalance.

#A Complete Example

Assume price produces a strong bullish three-candle move.

The high of the first candle is 4200.

The second candle expands aggressively to the upside.

The low of the third candle is 4206.

The range:

4200 to 4206

is therefore a bullish Fair Value Gap, or BISI.

Later, price moves lower and creates a SIBI between:

4204 and 4210

The overlapping portion of those two imbalances is:

4204 to 4206

That shared area becomes the BPR.

Now assume that elsewhere on the chart, one candle closes at 4230 and the next candle opens at 4232.

The gap between the bodies may represent a Volume Imbalance.

If instead the market jumps from around 4230 to a higher level without normal price delivery through the intervening range, the structure is more consistent with a Liquidity Void.

#Is Every FVG an Entry Point?

No.

An FVG only tells us that price delivery became imbalanced within that specific section of the chart.

A trading decision should also consider factors such as:

• broader market direction;

• market structure;

• liquidity location;

• premium and discount context;

• nearby institutional price zones;

• and the overall narrative of price action.

The strongest use of FVG is contextual, not mechanical.

An FVG becomes more meaningful when it aligns with other relevant market information instead of being traded in isolation.

#Common FVG Identification Mistakes

#Mistake 1: Treating Every Large Candle as an FVG

A large displacement candle alone does not create a Fair Value Gap.

There must be a lack of wick overlap between the first and third candles.

#Mistake 2: Assuming Every FVG Must Be Fully Filled

Price is not required to completely rebalance every Fair Value Gap.

It may partially enter the zone or never revisit it.

#Mistake 3: Treating BISI and SIBI as the Same Structure

BISI represents a bullish FVG.

SIBI represents a bearish FVG.

#Mistake 4: Marking Both Entire FVGs as BPR

A BPR is only the shared overlapping section between opposing Fair Value Gaps.

#Mistake 5: Treating Liquidity Void and FVG as the Same Thing

A Liquidity Void represents a more direct gap in price delivery, while an FVG is defined by a specific three-candle imbalance.

#Mistake 6: Confusing Volume Imbalance With Trading Volume

In this context, Volume Imbalance is identified from the relationship between two candle bodies.

It does not necessarily represent a direct measurement of buyer versus seller volume.

#Key Takeaways

• A Fair Value Gap is based on a three-candle structure.

• The wicks of the first and third candles must not overlap across the FVG range.

• BISI is a bullish FVG.

• SIBI is a bearish FVG.

• BPR is only the overlapping portion of a bullish and bearish FVG.

• Liquidity Void is different from FVG and refers to a more direct gap in price delivery.

• Volume Imbalance is a two-candle structure involving a gap between candle bodies.

• Price does not have to completely fill every FVG.

• None of these structures should be treated as a guaranteed trading signal on their own.

#Summary

A Fair Value Gap is one of the core price-imbalance concepts used in ICT and SMC. It is identified through a three-candle structure where the wick of the first candle and the wick of the third candle do not overlap within a certain price range.

A bullish FVG is known as BISI, while a bearish FVG is known as SIBI.

When opposing Fair Value Gaps overlap, the shared section forms a Balanced Price Range. Liquidity Void refers to a more direct gap in price delivery, while Volume Imbalance is identified between the bodies of two consecutive candles.

The most important point is that none of these concepts should be analyzed in isolation from the broader market structure and liquidity context.

#Frequently Asked Questions

#What is an FVG?

An FVG, or Fair Value Gap, is a three-candle price imbalance where the wick of the first candle and the wick of the third candle do not overlap across a specific price range.

#What is the difference between BISI and SIBI?

BISI is the bullish form of a Fair Value Gap, while SIBI is the bearish form.

#How is a BPR formed?

A Balanced Price Range forms when a bullish FVG and a bearish FVG overlap. Only the shared portion of the two FVGs is considered the BPR.

#What is the difference between FVG and Liquidity Void?

An FVG is a three-candle imbalance defined by the relationship between the first and third candle wicks. A Liquidity Void refers to a more direct gap or discontinuity in price delivery.

#What is the difference between Volume Imbalance and FVG?

An FVG uses a three-candle structure and focuses on wick overlap, while Volume Imbalance is a two-candle structure involving a gap between consecutive candle bodies.

#Does price always fill an FVG?

No. Price may fully rebalance an FVG, enter only part of it, react from its boundary, or never return to it at all.