Trade Tools - Fair Value Gaps

The Trade Tools - Fair Value Gaps indicator automatically identifies and highlights price imbalances across three-candle sequences to help traders spot potential institutional interest and price inefficiencies.

Usage

The indicator can be used to identify areas where price moved so rapidly that it created a gap between the first and third candle in a sequence. Traders often view these zones as targets for price to return to (rebalancing) or as support and resistance levels.

• Bullish FVG: Highlighted when the low of the current candle is higher than the high of the candle two periods ago.
• Bearish FVG: Highlighted when the high of the current candle is lower than the low of the candle two periods ago.

Details

A Fair Value Gap (FVG) is a three-candle pattern that occurs when there is an imbalance between buying and selling pressure. In a bullish scenario, the third candle's low does not reach the first candle's high, leaving a "gap" in the second candle's range. In a bearish scenario, the third candle's high does not reach the first candle's low. The script uses the box drawing object to project these zones forward into the future, making them easier to track for potential retests.

Settings

• Box Length: Determines how many bars forward the FVG box is extended.
• Box Transparency: Adjusts the visibility of the highlighted FVG zones.

FAQ

How do I access Trade Tools - Fair Value Gaps?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

Can I set alerts for these gaps?

Yes, the script includes built-in alert conditions that trigger whenever a new Bullish or Bearish Fair Value Gap is detected on the chart.

What timeframes does this work best on?

Fair Value Gaps appear on all timeframes; however, they are often considered more significant on higher timeframes (like the 1H, 4H, or Daily) as they represent larger market imbalances.