Fair Value Gaps Setup 01 FVG Absorption + CHoCH

The Fair Value Gaps Setup 01 indicator identifies trading opportunities by combining market structure shifts with Fair Value Gap (FVG) analysis to pinpoint high-probability reversal entries. It automatically detects Changes of Character (CHoCH) and provides localized areas of price inefficiency to guide trade execution during pullbacks.

Usage

The indicator identifies a setup when a shift in market structure occurs followed by the formation of an FVG in the expansion leg. Traders can use these zones for entry confirmation.

• Bullish Setup: Look for a bullish Change of Character (CHoCH) where the price breaks the previous major high. Once an FVG forms in the upward movement, a long position can be considered when the price pulls back into the "Demand FVG" zone.
• Bearish Setup: Look for a bearish CHoCH where the price drops below the previous major low. Once an FVG forms in the downward movement, a short position can be considered when the price returns to the "Supply FVG" zone.
• Low-Risk Zones: By enabling the Low-Risk Zone feature, the tool filters for FVGs that appear in the "Discount" area for buys or "Premium" area for sells, increasing the statistical likelihood of a favorable trade.

Details

The script utilizes a fractal market structure methodology, classifying movements into impulsive (aligned with the trend) and corrective (counter-trend) phases. A Break of Structure (BOS) confirms trend continuation, while a Change of Character (CHoCH) signals a potential trend reversal.

The Fair Value Gap is calculated by analyzing a central high-momentum candle. The range is defined by the gap between the wick of the preceding candle and the wick of the following candle. This script specifically filters for gaps that occur immediately after a market structure shift to ensure the inefficiency is tied to a significant change in institutional order flow.

Settings

Market Structure

• Pivot Period of Market Structure Detector: Sets the zigzag period based on pivots to detect key highs and lows.
• Show Major Bullish/Bearish ChoCh Lines: Toggles visibility and color for the origin lines of trend shifts.

FVG

• FVG Detector Multiplier Factor: Adjusts the required size of moves forming the FVG using an ATR-based coefficient. Higher values find more significant gaps.
• FVG Validity Period (Bar): Determines how many candles an FVG remains active on the chart before expiring.
• Mitigation Level FVG: Sets the specific price level within the FVG (Proximal, 50% OB, or Distal) that triggers mitigation status.
• FVG in Low Risk Zone: When enabled, only displays demand FVGs in the discount zone and supply FVGs in the premium zone.

Alert

• Alert: Toggles the notification system on or off.
• Message Frequency: Controls how often alerts trigger (All, Once Per Bar, or Per Bar Close).
• Show Alert Time by Time Zone: Adjusts the timestamp in alert messages to a specific UTC offset.

FAQ

How do I use the Fair Value Gaps Setup 01 on my chart?

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

What is the difference between BOS and CHoCH in this tool?

BOS (Break of Structure) indicates the continuation of the current trend, whereas CHoCH (Change of Character) indicates the first sign of a potential trend reversal.

Can I adjust the sensitivity of the gap detection?

Yes, you can modify the "FVG Detector Multiplier Factor" in the settings. Increasing this value will result in the script only highlighting larger, more impulsive price gaps.