Volume imbalance vs fair value gap: how to tell them apart

Many traders mix up two ideas that look alike on the chart: the fair value gap and the volume imbalance. Both describe a fast move that left something unfinished behind. The difference is small but useful, and once you see it you will stop drawing the wrong box.

The fair value gap in one minute

A fair value gap uses three candles. The wick of the first candle and the wick of the third candle do not touch each other. The space between them is the gap, because the middle candle moved too fast for the market to trade there in both directions.

The volume imbalance in one minute

A volume imbalance (VI) uses two candles. It is about the bodies, not the wicks:

The body of the second candle does not overlap the body of the first.
But the wicks still overlap, so price did trade through that area, just with a thin wick.

In the ICC Charts engine a bullish volume imbalance is found when the lowest part of the second candle's body is above the highest part of the first candle's body, while the second candle's low is still at or below the first candle's high. The zone runs from the top of the first body to the bottom of the second body. A bearish one is the mirror image.

Side by side

Candles used: FVG uses three. VI uses two.
What is compared: FVG compares wicks of candle 1 and candle 3. VI compares the bodies of two neighbouring candles.
Wicks: in an FVG the outer wicks do not touch. In a VI the wicks do overlap.
Size: a VI is usually thinner, because it is only the gap between two bodies.

A worked example

These numbers are only an illustration on a 5-minute chart. Candle one has a body from 100.0 to 101.0 and a high of 101.4. Candle two opens at 101.6, closes at 102.4 and has a low of 101.2.

The body of candle two (101.6 to 102.4) sits above the body of candle one (100.0 to 101.0). The bodies do not overlap.
The low of candle two (101.2) is below the high of candle one (101.4). The wicks do overlap.
So the pair is a bullish volume imbalance. The zone is from 101.0 to 101.6.

Whether it also becomes a fair value gap depends on the next candle. Only if the third candle's low stays above candle one's high do you also have a gap in the three-candle sense.

Why traders care about it

The idea is the same as with gaps: price moved quickly, so the market may come back to rebalance. A volume imbalance is a smaller, softer version of that story. Some traders treat it as a small area of interest inside or next to a bigger gap, and use its midpoint the way they use the 50% line of a gap. The terminal draws a CE line on FVG boxes, so you can compare the two on the same chart.

How to use it without fooling yourself

Start with context. A VI after a sweep of liquidity and a market structure shift means more than one in the middle of a quiet range.
Look for displacement. A strong candle, as in displacement, makes both gaps and imbalances clearer.
Prefer higher time frames. Tiny imbalances on the 1-minute chart are common and often meaningless.
Combine, do not stack. If a VI sits inside a fair value gap, treat it as one area, not two signals.
Remember the overlap idea. When opposite gaps overlap, the area is a balanced price range. That is a third, separate idea.

Common mistakes

Calling every small body gap a fair value gap. If the wicks touch, it is a VI.
Ignoring time of day. Many traders only look at these zones inside a killzone.
Expecting a reaction every time. Some imbalances are filled and ignored. Wait for a reaction or a lower time frame shift.
Trading against the bigger trend. A bullish imbalance in a strong downtrend fails often.

Practise it

Open the terminal and switch on the Displacement + VI layer, then add FVG / IFVG. Scroll back over a few days and compare the two kinds of zone. Count how often price returned to each and what happened. Write the result in a journal instead of trusting memory. You can also see how the engine uses these ideas on the models page.

Education only. ICC Charts is not affiliated with Inner Circle Trader (Michael J. Huddleston); these ideas are explained in our own words. A volume imbalance is not a signal on its own. Trading involves risk; practise on a demo account first.

Try it on a live chart

Open ICC Charts in your browser, free, with the ICT and VSA layers and the model scanner. Or practise on past charts in the free Chart Challenge game.

Open it on the chart → Play the chart game

On MetaTrader 5? Our free FVG & order block indicator draws these zones on your MT5 charts with the same rules as ICC Charts (free account).

New articles and the daily chart challenge on Telegram → t.me/icccharts