Higher Time Frame Fair Value Gap

The Higher Time Frame Fair Value Gap indicator identifies and displays fair value gaps (FVG) from a user-specified higher timeframe directly onto a lower timeframe chart, providing a multi-timeframe perspective on market imbalances. It helps traders visualize institutional order flow and potential price magnets without manually switching timeframes.

Usage

The indicator is used to identify price imbalances where buy or sell pressure was so significant that a "gap" was left between the wicks of three consecutive candles on a higher timeframe.

• Higher Timeframe Visualization: The script draws colored boxes and trendlines representing the FVG boundaries. A bullish FVG (green) indicates an area of buying pressure, while a bearish FVG (red) indicates selling pressure.
• Trendline Analysis: When enabled, the indicator draws an extended trendline from the most recent swing high or low to the edge of the FVG, helping identify the directional origin of the imbalance.
• Volume Metrics: The tool calculates and displays the buying or selling pressure as a percentage ratio of volume within the formation, offering insight into the conviction behind the gap.
• Dynamic Detection: It can detect FVG formations as they start to form on the higher timeframe, providing early awareness before the higher timeframe candle actually closes.

Details

A Fair Value Gap is a three-candle pattern where the high of the first candle and the low of the third candle (in a bullish scenario) do not overlap, leaving a "gap" in the middle candle's range. This indicator implements this logic across multiple timeframes.

The script includes specialized handling for data integrity, such as the option to skip "inside bars" which can often lead to false FVG signals in low-volatility environments. Additionally, the "Consistent Updates" feature ensures that HTF gaps are only maintained if there is continuous trading activity on the chart's native timeframe, filtering out gaps formed during illiquid periods like extended hours.

Settings

• Higher Time Frame FVG: Selects the timeframe for gap detection (e.g., 15m, 1h, 4h). This must be higher than the current chart timeframe.
• Show Trend Line: Toggles the display of the extended trendlines originating from swing points.
• Show Lower Time Frame FVG: Enables detection and display of FVGs based on the current chart's timeframe.
• Include Inside Bars: Determines if the script should include or skip inside bars when evaluating the three-candle FVG sequence.
• With Consistent Updates: If checked, dismisses gaps that occur during periods with no chart updates (e.g., low activity/extended hours).
• Alerts Section: Includes toggles for FVG formation, price action entering a gap, and full gap mitigation.

FAQ

How do I interpret the percentage ratio shown on the gaps? The percentage represents the volume pressure (up volume for bullish, down volume for bearish) of the second HTF bar relative to the total volume of the first two bars in the sequence.

Why are some gaps shown with dashed lines? Dashed lines indicate that the Fair Value Gap has been "mitigated" or "closed," meaning price has traded back into that range and filled the imbalance.

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