Three core setups
All three assume the gap passed the validation from the identifying chapter — clean geometry, real impulse behind it, and structural context nearby. Skip any setup where you had to convince yourself the gap counts.
Wait for price to return to the gap after the initial breakout. Enter on a limit order at the near edge of the gap (the high for bullish, the low for bearish), confirmed by a rejection candle on the entry bar. Stop goes at the far edge of the gap. Target the next structural level.
Best when: the broader timeframe is trending and the gap sits at a level already watched.
Take the breakout itself, then wait for the pullback to the gap's midpoint (sometimes called the “consequent encroachment” level). Enter on a momentum candle with a visible volume lift off that midline. Stop below the gap's far edge. First target: the next liquidity level.
Best when: price is trending hard enough that a full retest to the gap edge doesn't happen.
The highest-probability of the three. An FVG that sits inside an order block — the last opposing candle before the impulse — concentrates two ICT primitives at the same price. Entry logic mirrors Setup 01, but the stop goes at the order-block edge rather than the gap edge. Bigger room, better win rate.
Best when: you have both geometry (the gap) and institutional positioning (the order block) agreeing at the same price.
All three setups work best aligned with a clean higher-timeframe trend. In chop or rotation, FVG retests fail more often than they hold — because the bigger picture isn't providing the follow-through. If the 1-hour is directionless, consider sitting the session out.
Risk management
The setups don't matter without the structure underneath. Two non-negotiables:
Stop placement
Always beyond the gap's far edge — below the gap low on a bullish entry, above the gap high on bearish. Anywhere tighter and normal market noise takes you out. The gap is either a level or it isn't; the stop location is the bet.
Position sizing
One to two percent of the account per trade. Size for the stop distance, not for a fixed contract count — a wider-stop gap on NQ warrants fewer contracts than a tighter-stop gap on ES.
Conceptual takeaways
- Three setups: retest, breakout-pullback, order-block confluence. Master one before adding the next.
- Stop beyond the far edge — noise takes you out of anything tighter.
- Size for the stop distance, not for a fixed contract count.
Next chapter: the psychology of trading an FVG. Every working setup eventually meets a trader who can't follow it — and FVGs are high on the list of setups where execution breaks down first.
The Profit Forecast indicator reads your ATM orders and converts tick distance to dollars and R-multiples live — eliminates the mental math that trips traders up during FVG management.