IOFED
Entering on the gap left by a breakout
A continuation setup, not a reversal
Most of the concepts on this site look for price to turn: a sweep that reverses, a failed breakout, a change in delivery. This one does the opposite. It assumes the break was genuine and looks for a way to join it after the initial move.
The problem it solves is practical. When price breaks decisively through an old high, chasing it means entering at the worst price with a distant stop. This setup waits for a specific kind of pullback instead.
How it forms
Entry on the gap left by a breakout
Gap left inside the breakout move
An old swing high with buy stops resting above it, along with orders from traders waiting for a breakout.
Price takes that level decisively. The move is fast enough to leave a gap behind it, which is the signature this setup looks for.
The wick reaches down into the gap and the entry fills, but the body closes back above it. Buyers did not allow price to settle inside the gap, which is the confirmation this setup wants.
Look closely at the third marked candle: only its wick enters the shaded area. A body closing inside the gap means price is being accepted there rather than rejected from it, which is a materially weaker signal.
The sequence has three requirements. Price takes out an old swing point, the move doing so is fast enough to leave a gap behind it, and price then returns into that gap rather than continuing straight up. The gap becomes the entry area and the level below it becomes the invalidation.
The wick enters, the body does not
This is the detail that separates a valid setup from one that is failing, and it is easy to miss. The return into the gap should be made by the wick alone. The candle body should close back above the gap, not inside it.
The reason is what each one tells you about who is in control. A wick means price reached that level and was rejected from it immediately, with buyers absorbing everything offered before the candle could close there. A body closing inside the gap means price is being accepted at that level, and the buying that was supposed to defend it did not arrive in time.
- Wick into the gap, body above it. The setup is behaving as intended. The entry fills and the rejection confirms it.
- Body closing inside the gap. A weaker signal. Price is comfortable there rather than being pushed away, so the continuation is less likely.
- Body closing below the gap entirely. The setup has failed. The breakout is looking more like a sweep, and the stop should already be handling it.
In practice this means placing a limit order inside the gap and letting the wick fill it, rather than waiting for a candle to close there before entering. Waiting for a close inside the gap means you only ever enter on the version of the setup that is already weaker.
Telling it apart from a sweep
Both start the same way, with price pushing beyond an obvious level where orders are resting. What separates them is what happens immediately afterwards.
- A sweep pushes through and closes back inside the range quickly. The level was taken, not broken, and the expectation is reversal.
- An IOFED pushes through and holds beyond the level, leaving a gap in the move. The expectation is continuation.
Because the two look identical at the moment of the break, this is a setup that requires waiting. Acting during the break itself means guessing which one you are looking at.
A worked example
Entry, stop, and target
GBPUSD has a swing high at 1.2740 that has held for two sessions. During the London session, price breaks through it and runs to 1.2790 without pausing, leaving a gap between 1.2748 and 1.2762.
You place a limit order at 1.2755, inside the gap. Price wicks down to 1.2752, filling the order, then that candle closes back at 1.2768, above the gap entirely. The body never settled inside it.
Stop below the gap and the old high at 1.2736, so 19 pips of risk.
The target is the next area of resting liquidity above, a prior high at 1.2850, which is 95 pips away. That is a ratio of 5:1. On a $10,000 account risking 1%, the 19 pip stop allows roughly 0.52 lots.
What improves the odds
- The level taken was genuinely significant, such as a previous day or week high, rather than a minor intraday swing.
- The breakout move was impulsive, with large candles and little overlap, which is what produces a clean gap.
- Only the wick reached into the gap, with the body closing above it.
- The higher timeframe direction supports continuation, so the break is with the larger trend.
- There is visible liquidity above to aim at, giving the continuation somewhere specific to go.
When the break happens against the higher timeframe direction, this setup becomes considerably less reliable, since the most likely explanation for the move is a sweep rather than a genuine breakout.
The main failure mode is a break that looked convincing and then reverses anyway, taking out the stop below the gap. This is the same price action as a slower sweep, and no criteria distinguish the two with certainty in advance.
Since the setup relies on the break holding, it deserves particular attention in the journal. Record whether the higher timeframe agreed on each attempt, and whether the body stayed above the gap or closed inside it, then compare how each group performed separately.