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Fair Value Gap - 4

The CONSEQUENT ENCROACHMENT (C.E)

The consequent encroachment is simply the midpoint or 50% equilibrium level of a FVG.

A — Sellside Imbalance Buyside Inefficiency (SIBI)

In the case of SIBI, the C.E can play the role of a resistance level, and ideally the price should close below the C.E. Keep in mind that a candle whose body closes above the FVG high renders this bearish FVG invalid (this situation is called Fair Value Gap Inversion as the bearish FVG becomes a support level for the price)

B — Buyside Imbalance Sellside Inefficiency (BISI)

In the case of BISI, the C.E acts as a support level, and ideally the price should close above the C.E. Keep in mind that a candle whose body closes below the FVG low renders this bullish FVG invalid (this situation is called Fair Value Gap Inversion as the bullish FVG becomes a resistance level for the price)

To read the previous part Fair Value Gap - 3