What is Consequent encroachment (CE)?
In short
The exact midpoint (50%) of a fair value gap. When price returns to an FVG it often reacts around this level; traders use it as an entry or exit reference.
Also known as: CE, 50% FVG
Consequent encroachment (CE) is the exact midpoint — the 50% level — of a fair value gap (FVG). The term comes from the ICT (SMC) style. When price returns to an FVG it often reacts around this midpoint rather than filling the whole gap.
How it is calculated
In a three-candle FVG the gap lies between candle 1's high and candle 3's low (for a bullish gap):
- CE = (FVG upper bound + FVG lower bound) ÷ 2
How it's used
- Entry reference: a limit order goes at the CE rather than anywhere in the FVG — a better entry price, with the stop beyond the FVG.
- Strength gauge: in a bullish FVG, if candles keep closing above the CE the gap is considered "held". If bodies start closing below it, the odds rise that the gap gets fully filled and the zone fails.
- Exit: the CE of an opposite FVG can serve as a partial profit point.
Limitations
The CE is just a mathematical midpoint with no magic to it. Price may turn before touching it (no fill) or pass through it and fill the entire FVG. So it is used alongside other evidence.
A gap was left between candle 1's low ($59.60) and candle 3's high ($57.60). Price came back to the middle of the zone — the CE at $58.60 — and was rejected. For a buyer this says: don't open new longs under such a zone; take partial profit or tighten the stop on what you hold.
Example
An illustrative stock has a three-candle bullish FVG:
- Candle 1 high: $30.40; candle 3 low: $31.60. FVG = $30.40–$31.60.
- CE = ($30.40 + $31.60) ÷ 2 = $31.00.
The trader places a limit order at $31.00 with a stop below the FVG at $30.20 (risk $0.80). Target $33.40: a $2.40 gain = +3R. If price comes back and daily candles start closing below $31.00, the trader trusts the idea less. Size the trade with the position size calculator.
Mistakes and tips
Judge the CE by candle bodies: a wick through it is normal, a body close matters more.
The CE of tiny FVGs on low timeframes gives lots of false signals — start with daily or hourly zones.
With a limit at the CE, accept that price may leave without filling you — don't chase the missed trade.
Frequently asked questions
- What is consequent encroachment in an FVG?
- It's the exact middle (50%) of the fair value gap, found by adding the gap's upper and lower bounds and dividing by two.
- Is an FVG invalid if price trades through the CE?
- Not immediately, but bodies closing beyond the CE weaken the zone. If the far edge of the FVG is also broken on a close, the zone is usually considered invalid.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
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