London Session FVG Strategy

Overview

The London Session FVG Strategy is based on ICT (Inner Circle Trader) concepts, specifically the exploitation of institutional order flow during the London open. When institutional players open positions at the start of the London session (typically 3:00–5:00 AM EST), they often move price aggressively, creating imbalances called Fair Value Gaps (FVGs) — price areas where the market traded so quickly that not all orders were filled.

These gaps act as price magnets. The market frequently returns to fill these imbalances during subsequent price action — typically in the New York morning session (9:30 AM–12:00 PM EST). This return to fill the FVG provides a high-probability entry point.

Market Context

When this setup works best:

• Clear directional displacement during the London open (3:00–5:00 AM EST)
• The overall daily/weekly bias aligns with the direction of the FVG trade
• Price has swept a liquidity level (recent high or low) before creating the FVG
• Economic calendar shows no major US data releases in the next 2 hours of trading

When to skip:

• NFP, FOMC, or CPI release days (extreme volatility invalidates FVG fills)
• When price has already filled the FVG before your trade window
• No clear displacement during London session (FVG requires an impulsive move)
• Trading during the New York close or Asian session

Required Tools and Indicators

Fair Value Gap (FVG) identification:

An FVG forms when three consecutive candles create a gap: Candle 1's low > Candle 3's high (bullish FVG) or Candle 1's high < Candle 3's low (bearish FVG). The gap between these candles is the FVG.

Chart setup:

• 15-minute chart: Identify the FVG location during London session
• 5-minute chart: Entry precision and stop placement
• Mark session highs and lows (Asian session range, London session range)

Entry Rules

Bullish FVG Trade (Long):

1. 1During the London session, price makes a bullish FVG on the 15-minute chart — a strong upward displacement with a visible imbalance gap
2. 2Wait for price to retrace into the FVG during the New York morning session
3. 3Enter long when price fills 50% of the FVG (the midpoint)
4. 4Confirm with a bullish 5-minute candle structure in the FVG area (e.g., bullish engulfing or rejection wick)
5. 5The FVG must be above the current daily equilibrium (mid-range of the daily range)

Bearish FVG Trade (Short): Mirror of the above.

Stop Loss Placement

For long entries: Stop below the low of the FVG (the bottom of the imbalance zone).

Why: If price trades through the entire FVG, the bullish displacement was not institutional — or the level has been invalidated by bearish order flow. The trade thesis is wrong.

For short entries: Stop above the high of the FVG.

Typical stop distances: 10–20 pips for major forex pairs (EUR/USD, GBP/USD).

Take Profit Targets

Target 1 (1:2 R:R): 2× stop distance. Take 50% here and move stop to breakeven.

Target 2 (1:3 to 1:4): Next significant liquidity level — prior session high/low, weekly high/low, or a clean technical level on the 15-minute chart.

The FVG strategy is particularly good for extended runs because institutional order flow created the FVG, and the same institutions are often defending the direction.

Position Sizing

For forex, standard lot = 100,000 units. Calculate risk based on pip value:

• EUR/USD: $10 per pip per standard lot
• If stop is 15 pips away and risk is $150: $150 ÷ ($10 × 15) = 1 standard lot

Example Trade 1: EUR/USD Bullish FVG Fill

London session creates a sharp displacement upward at 3:45 AM EST. On the 15-minute chart, three consecutive candles form with Candle 1 low at 1.0820, Candle 3 high at 1.0835. The FVG is from 1.0820–1.0835.

Price rallies to 1.0875 by the time the NY session opens.

• 9:45 AM EST: EUR/USD pulls back into the FVG. It enters the gap at 1.0840.
• 10:00 AM: Price touches the 50% point of the FVG (1.0827) and a bullish 5-minute engulfing forms.
• Entry: 1.0827 (FVG midpoint)
• Stop: 1.0818 (below FVG low) = 9 pips
• Target 1: 1.0845 (2× stop = 18 pips) = 2:1 R:R
• Target 2: 1.0875 (prior NY session high) = 48 pips = ~5:1 R:R
• Outcome: Price reaches 1.0870. Partial exit at Target 1, remainder closed near Target 2.

Example Trade 2: GBP/USD Bearish FVG Short

London open produces a sharp drop in GBP/USD. FVG formed from 1.2680 (H) to 1.2660 (L) on 15-min chart.

• 10:30 AM EST: GBP/USD retraces back into the FVG, reaching 1.2671 (midpoint).
• A bearish 5-minute engulfing candle forms at the FVG midpoint.
• Entry short: 1.2671
• Stop: 1.2682 (above FVG high) = 11 pips
• Target 1: 1.2649 (2:1 R:R)
• Target 2: 1.2635 (Asian session low, prior support turned resistance)
• Outcome: GBP/USD declines to 1.2642. Target 1 hit, partial close. Remainder stopped at breakeven as price consolidates.

Common Mistakes

Entering before the FVG retrace:

You see the displacement and want to enter immediately. But price hasn't retraced to fill the gap yet — you're entering at a poor R:R and missing the core premise of the strategy.

Not waiting for the NY session:

FVG fills during the Asian session or before NY open have lower follow-through because institutional participation is lighter outside of London/NY overlap.

Ignoring the broader bias:

Trading a bullish FVG setup on a day when the dollar is in a strong uptrend works against you. Always assess the daily and weekly bias before trading individual session setups.

Treating all FVGs as equal:

A small FVG (5–8 pips) on low-volume displacement is much weaker than a large FVG (20+ pips) on high-volume institutional activity. Use the size and volume of the displacement as a quality filter.

How to Track This Setup in Tradapt

Create playbook entries "London FVG Long" and "London FVG Short" with the explicit FVG identification criteria and entry rules. Tag trades with the pair (EUR/USD, GBP/USD) for instrument-level analysis.

After 30+ trades, check cross-analysis: FVG performance by pair, by day of week, and by whether the fill occurred in the NY morning (9:30–11:00) vs. late morning (11:00–12:00). You'll likely find the NY morning window has the highest fill rate.