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Breakaway Fair Value Gaps

By LuxAlgoDec 4, 2024

Breakaway Fair Value Gaps is an indicator on Vela, our next-generation charting platform, written in Pine Script®.

Static chart image

Breakaway Fair Value Gaps isolates a specific breed of fair value gap: imbalances printed while price is breaking into new highs or lows of its range, with the range framed by Donchian Channels. Like the classical breakaway gap, these formations capture buyers or sellers driving the market aggressively beyond an extreme, which generally argues for continuation, yet because they form where price is already stretched, they can just as well precede the counter-move that rebalances them. A statistics dashboard turns that judgment call into a data question.

How to Trade the Breakaway Fair Value Gaps?

  • Continuation read: a Breakaway FVG in the breakout's direction reflects momentum-driven conviction at the extreme.
  • Reversal read: gaps created off-balance at range extremes often attract a move back to fill them; the dashboard shows how often that has resolved on your chart.
  • Mitigation levels: unresolved gaps project their fill level to the current bar, keeping the distance to mitigation measurable.
  • Dashboard stats: bullish and bearish gap counts, the share mitigated within your window, and the average or median bars to fill.

Pairing the gaps with a confirmation tool and targeting the projected mitigation levels is the intended workflow.

Breakaway Fair Value Gaps Settings

  • Trend Length: the Donchian Channel trend length defining the extremes where gaps qualify.
  • Show Mitigation Levels: hide the projected fill levels to show gaps alone.
  • Maximum Duration: the analysis window in bars; gaps unfilled beyond it count as un-mitigated.
  • Show Dashboard: toggles the statistics panel.
  • Use Median Duration: report the median bars-to-fill instead of the average.

Frequently Asked Questions

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Also works on

TradingView
Original indicatorBuilt in-house by LuxAlgo

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