Inversion Fair Value Gaps with Volatility & Sweeps AT

The Inversion Fair Value Gaps with Volatility & Sweeps indicator identifies market imbalances and liquidity-seeking price action to highlight high-probability reversal and reaction zones.

Usage

The Usage section describes how the script can be used to interpret market structure through Fair Value Gaps (FVG), Inversion Fair Value Gaps (IFVG), and Liquidity Sweeps.

Inversion Fair Value Gaps (IFVG)

The indicator first detects standard FVGs (three-candle imbalances). If price closes through a previously established FVG, it is transformed into an Inversion FVG.

• Bullish IFVG (from Bearish FVG): Formed when the market closes above a Bearish FVG. These zones often act as support.
• Bearish IFVG (from Bullish FVG): Formed when the market closes below a Bullish FVG. These zones often act as resistance.

Liquidity Sweeps

The tool monitors swing highs and lows (Buy-side and Sell-side liquidity). A sweep is identified when the price pierces a previous peak or trough but fails to hold that level, closing back within the range. These events are highlighted with horizontal lines and often signal stop hunting or institutional positioning.

Volatility Filtering

To ensure only significant imbalances are tracked, the indicator uses an ATR-based filter. Only gaps larger than the specified volatility threshold are displayed, reducing market noise during low-volatility periods.

Details

The script executes a multi-stage logic to track price action:

1. Detection: It identifies 3-candle patterns where a gap exists between the first candle's wick and the third candle's wick.
2. Validation: It calculates the current ATR to determine if the gap size meets the user-defined significance threshold.
3. Inversion Tracking: It continuously monitors whether a candle close violates the boundary of an active FVG, triggering the "Inversion" state.
4. Mitigation: The IFVG remains active until it is "mitigated" (retested). Users can choose whether mitigation occurs on a wick touch or a candle close.
5. Liquidity Logic: It stores a limited array of recent swing points and checks if the current candle's high/low exceeds them while the close remains on the opposite side.

Settings

General Settings

• ATR Length: The lookback period for the Average True Range used in volatility filtering.
• ATR Multiplier: Determines the minimum size a gap must be (Gap > ATR * Multiplier) to be plotted.
• Show Last IFVGs: Controls the maximum number of historical inversion zones displayed on the chart.
• Mitigation Type: Sets the condition for an IFVG to be considered filled (Close or Wick).
• Show Original FVG Segment: When enabled, displays the original FVG box leading up to the point of inversion.

Liquidity Sweep Settings

• Show Liquidity Sweeps: Toggles the visibility of horizontal liquidity sweep lines.
• Swing Lookback: The number of candles required on either side to define a pivot high or low.

Style

• Color Inputs: Allows customization of colors for Bullish/Bearish FVGs, Inversions, Borders, and Liquidity Sweep lines.

FAQ

How do I use IFVGs in a trading strategy? IFVGs are typically used as confluence. A common approach is to look for a liquidity sweep followed by price reclaiming an IFVG, which suggests a shift in market sentiment and potential trend reversal.

What is the difference between an FVG and an IFVG? A Fair Value Gap (FVG) is a zone of price imbalance. An Inversion Fair Value Gap (IFVG) occurs when that original imbalance is "failed" or traded through, causing the zone to swap its role from support to resistance (or vice versa).

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