Mastering Inverse Fair Value Gaps: PB Theory

Main ideas / concepts

• The video is part of a PB Theory series (episode 12), explaining Inverse Fair Value Gaps (IFEGs), part two.
• Core principle: to improve results, traders should generally use the highest relevant time frame fair value gap (FVG) for the inversion.
• The strategy works by:
  • Identifying manipulation legs
  • Then waiting for fair value gap inversion(s) inside those legs before entering trades.
• There are strict anti-discretion rules for certain scenarios—especially those involving 5-minute gaps.
• Trade quality depends on the strength of the inversion:
  • Strong displacement through the gap is preferred
  • Weak/low-volatility inversions are lower quality
• The presenter emphasizes avoiding entries when price action suggests liquidity/resistance near the stop loss (LR) that could cause stop-outs.
• The video includes multiple worked examples and a backtesting walkthrough (live thought process) across several “new day open” scenarios.

Method / rules (instruction-style)

1) Always determine the manipulation leg

Identify a manipulation leg by observing price movement:

• Price goes up, then down (or vice versa), and then trades into a key level.

Key-level context may include possible FVGs across multiple time frames, such as:

• Lower TF key levels: 5-minute, 15-minute
• Higher TF key levels: 1-hour, 4-hour

2) Choose the “highest time frame” FVG for inversion

For the specific leg you plan to trade:

• Find which time frame(s) contain the relevant fair value gap.
• The highest-timeframe inversion is emphasized as key to achieving a higher win rate.

General flow:

• After price taps into a lower/higher key level, look inside the leg for the highest-timeframe FVG that must invert before entry.

3) Wait for all required inversions inside the leg

If multiple FVGs exist on the highest time frame within the same leg:

• Do not enter after the first inversion.
• Wait until all of them invert.

Examples described:

• If you plan to invert a 1-minute gap, but there is also a 2-minute FVG still “inside” the leg:
  • You must wait for the 2-minute inversion even if the 1-minute inverted first.
• If the highest TF is 2-minute and there are two 2-minute gaps in the leg:
  • Wait for both 2-minute inversions.

4) Anti-discretion rule: never enter inside a 5-minute gap you just traded into

Primary hard rule:

• Never enter a trade if you are inside a 5-minute gap that you have just traded into.

Expected consequence:

• Attempting to enter “earlier” while inside that 5-minute gap is presented as frequently resulting in reversals (roughly ~80%).

Action:

• If the relevant inversion requirement is a 5-minute gap:
  • Wait for the 5-minute gap to invert, then enter.

5) Limit inversion time frame (highest inversion is typically 5-minute)

The presenter states:

• The highest time frame inversion to normally take is 5-minute.

Reason given:

• Very large gaps take too long to form/invert (e.g., a 50-minute gap requires many candles to open, causing excessive delay).

6) Only take “good” inversions (displacement quality matters)

Avoid inversions that are:

• Teen y weeny (very small)
• Occur with low-volatility candles—especially if:
  • The inversion candle is tiny
  • The close is weak (barely inverting)

Preferred:

• Strong candle inversions with clear displacement through the gap
• More confidence when the inversion produces obvious momentum/volatility

7) Avoid trades where liquidity/resistance forms near your stop

The video warns against entries when:

• As price inverts, it begins chopping/accumulating near the stop
• LR (low resistance liquidity) forms close to the stop loss

This increases the likelihood of stop-outs.

8) Stop loss and take profit guidance in examples

Stop loss placement:

• Often based on manipulation-leg structure.
• Commonly: stop at the body of the manipulation leg candle (wicks may appear in other scenarios, but body is the default in examples)

Take profit:

• Often targets around 1:1
• Break-even placement is often tied to major highs (linked to an earlier liquidity concept referenced by the presenter)

9) If inversion timing is uncertain, waiting for confirmation can help

If you must zoom in to confirm whether price truly inverted:

• The presenter suggests waiting for a better-confirmed candle/inversion.
• In the provided example, the “wait” remains consistent with the required highest time frame inversion.

Key examples / scenarios covered (what happens)

• Long example (highest TF = 1-minute in that leg)

  • After locating the manipulation leg and the highest TF FVG inside it:
    • The entry occurs after that highest TF FVG inverts
  • Stop loss: placed at/near the manipulation leg body
  • Target: discussed around a 1:1

• Short example (highest TF = 2-minute in that leg)

  • Even if a 1-minute gap exists:
    • If a higher 2-minute gap is inside the leg, you must wait for the 2-minute inversion(s) before entering.

• Additional long example (highest TF = 5-minute in that leg)

  • Since the highest TF FVG is 5-minute:
    • Entry waits for the 5-minute inversion
  • Emphasis on a “good close” that clearly shows displacement through the gap.

• Backtesting / “new day open” walkthrough

  • Demonstrates:
    • Identifying daily bias (bullish/bearish)
    • Looking for manipulation into gaps before market open
    • Picking the highest TF FVG for inversion
    • Situations where trades fail due to:
      • Weak/tiny gaps requiring micro-level zoom
      • LR forming near the stop
  • The takeaway: waiting for the correct highest TF inversion helps prevent unnecessary stop raids and improves win rate.

Speakers / sources featured

• Main speaker (presenter): “PB Theory” creator
  • The presenter notes he also edits/produces the videos himself.
  • No personal name is given in the subtitles.