ICT Implied Fair Value Gap (IFVG)

An Implied Fair Value Gap (IFVG) is a unique trading indicator developed for traders looking to efficiently identify and utilize imbalances in the market. It uses a formation of three candles, initially proposed by ICT, where a larger candle body indicates an imbalance. This indicator works by measuring the average between the shadows of the two adjacent candles. With the IFVG detection tool, traders can auto-detect these imbalance formations seamlessly, enhancing their trading strategy whether you're focusing on trends or support and resistance levels.

How Does the IFVG Indicator Work?

This innovative indicator automatically detects the Implied Fair Value Gap on your trading charts and allows personalization by setting a specific number of extension bars. By extending the IFVG average until a new equivalent formation is found, this tool also provides dynamic support or resistance levels — crucial for predicting potential trend reversals or continuations.

The IFVG indicator includes alerts for the identification of both bullish and bearish IFVG formations, keeping traders informed and prepared.

SETTINGS

• Shadow Threshold %: This adjustable parameter lets users filter out IFVGs with minimal adjacent candle shadows, refining the accuracy of imbalance detection.
• IFVG Extension: Customize how far highlighted IFVG areas extend using this setting, allowing for greater flexibility in analyzing potential price movement.
• Extend Averages: Continue the extension of IFVG averages until the next corresponding IFVG is detected, aiding in long-term support and resistance analysis.

How to Trade the IFVG Trading Indicator?

A key aspect of the IFVG indicator is its versatility in trading imbalances, similar to standard Fair Value Gaps (FVG) or other imbalance types. When trading a bullish IFVG, for instance, identified imbalances can indicate zones where the price is likely to react, serving as potential support areas.

Similarly, bearish IFVGs suggest zones where the price might act as resistance within a downtrend, making them suitable areas for short entries.

Moreover, extending IFVG averages to be used as longer-term support/resistance lines can reveal significant zones, improving the accuracy and outcome of future trades.

The Details Behind IFVG

Different methods exist for detecting regular FVGs, and the same applies to their implied versions. Our algorithm follows specific rules for identifying IFVGs, ensuring reliability and consistency in trading.

Bullish IFVG Conditions

• The central candle body surpasses the size of adjacent candles.
• The current low surpasses the high price from two bars ago.
• More than p percent of the current candle's range is made up by its lower shadow.
• More than p percent of the candle's range two bars ago is composed of its upper shadow.
• The average lower shadow current candle is higher than the average upper shadow two bars ago.

*Note: p is determined by the user through the threshold setting.

Bearish IFVG Conditions

• The central candle body exceeds the size of adjacent candles.
• Current high surpasses the low price from two bars ago.
• More than p percent of the current candle's range is made up by its upper shadow.
• More than p percent of the candle's range two bars ago is composed of its lower shadow.
• The average upper shadow of the current candle is lower than the average lower shadow two bars ago.

*Note: p is adjustable via the user threshold.

Supplementary Material

Explore our previously crafted script for imbalance detection, including regular Fair Value Gaps, at this link, which shares similarities in utility with the Implied Fair Value Gap.

FAQ

1. How can I access the Implied Fair Value Gap indicator?

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

2. What makes the IFVG different from a regular Fair Value Gap?

• The IFVG not only assesses imbalance but also focuses on the relationship between candle bodies and shadows for more in-depth analysis, accommodating different trading styles.

3. Can the IFVG indicator be used for long-term strategies?

• Yes, by extending IFVG averages, traders can utilize identified support and resistance levels for more prolonged analysis and decision-making.