When a Fair Value Gap (FVG) retraces only halfway and then reverses, that is the core entry logic behind FVG trading. "Halfway" refers to the 50% midpoint of the FVG, known as Consequent Encroachment (CE). It does not mean waiting for the entire gap to be filled. The key to determining your entry is whether the price shows a clear rejection signal exactly at this 50% level, not how much of the gap has been filled.
Step 1: Tell the Difference Between a Partial Fill and Hitting CE
First, figure out which part of the FVG the price has reached. This directly decides your next move.
What to do: Mark the FVG zone on your chart and calculate its midpoint (CE).
How to do it:
After you spot an FVG, note the high and low of the zone. For a bullish FVG, the lower edge is the high of the first candle and the upper edge is the low of the third candle. For a bearish FVG, the upper edge is the low of the first candle and the lower edge is the high of the third candle.
Calculate the 50% midpoint: (Upper edge + Lower edge) ÷ 2.
Watch how the price behaves after entering the FVG: Did it turn around before reaching CE, or did it test the CE level precisely?
Done when: You know exactly where the current price sits — in the lower half of the FVG, touching CE, or having moved past CE.
Step 2: Identify the Entry Condition – The Reaction at CE
A "half retracement" by itself is not a signal. The reaction at CE is what matters. If the price forms a clear rejection pattern near CE, that is your entry point.
Case A: A clear reversal signal appears right at CE. This is a high-quality entry. It looks like this: the price hits CE and quickly turns around, or it forms a small-scale reversal candlestick pattern near CE (like a hammer, engulfing candle, or a pin bar with a long wick). Research data shows that when price reaches the CE level of an FVG, it reacts about 70% of the time. Many institutional traders place limit orders at CE instead of the edge of the FVG to get a better fill price.
Case B: The price turns around before even touching CE. This is a partial fill; the gap is still valid and may get tested again. Right now, there is no entry.
Case C: The price slices straight through CE and keeps moving, eventually filling the whole FVG and closing beyond it. This means the FVG has been effectively dealt with. The original directional expectation may no longer hold, and an Inverse FVG (IFVG) could form — a bullish FVG that gets fully filled and broken to the downside turns into a bearish resistance zone.
Common Reasons for Failure
Many traders rush to place limit orders as soon as the price enters an FVG, but they skip the "wait for confirmation" step. If the price just makes a fake move, fails to create a clear rejection pattern, and continues in the opposite direction, a blind entry will likely get stopped out.
Step 3: Filter FVGs by Context Quality
Not every FVG is worth trading. If the FVG itself is low quality, even a bounce at CE will only have a limited win rate.
What to do: Decide whether this FVG qualifies as a "high-quality FVG."
How to do it: Prioritize FVGs that meet these conditions:
Confluence: The FVG overlaps with higher-timeframe support and resistance, or sits inside a discount zone (buy in discount, sell in premium).
Time priority: The first FVG formed within a trend is usually more valuable than the ones that come later.
Multi-timeframe stacking: If FVGs from multiple timeframes cluster in the same price area, the quality of that zone increases significantly.
Done when: You filter out "trap FVGs" that sit in the middle of a range and only trade high-quality gaps with clear confluence.
Risk reminder: The freshness of an FVG matters. A newly formed FVG is most likely to be respected; the older it gets, the less reliable it becomes. Also, even if the price bounces at CE, an extremely strong trend may only retrace a tiny portion of the gap before continuing.
How to verify your entry: After entering, use the opposite boundary of the FVG (or slightly beyond CE) as a reference for your stop loss. If you entered after a clear rejection signal at CE and the price moves in your favor, your entry logic was sound.
Next steps: After entry, your target can be set at opposing liquidity pools (like previous highs or lows) or the next unfilled FVG. If the price does not react at CE and instead digs deeper into the FVG, do not rush to move your stop loss. First, watch whether it forms a reversal signal at the other boundary of the FVG (the fully filled area). In that case, the Inverse FVG (IFVG) strategy might be your next consideration.
