Volume-Confirmed Fair Value Gaps

The Volume-Confirmed Fair Value Gaps indicator detects Smart Money Concepts (SMC) imbalance zones and validates them using volume analysis to highlight institutional displacement moves. By integrating volume confirmation, the tool filters out weak gaps formed during low-participation periods, allowing traders to focus on high-probability zones for scalping, intraday, and trend continuation strategies.

Usage

The Usage section describes how the script can be used to identify institutional activity and potential reversal or continuation points.

• Institutional Displacement: The script automatically plots bullish and bearish Fair Value Gaps (FVG). Zones formed with a volume spike suggest stronger institutional participation, whereas gaps formed on low volume are often filtered to avoid weak setups.
• Trend Continuation: Traders can use these zones as points of interest (POI). In a bullish trend, a volume-confirmed bullish FVG can act as a support zone for long entries.
• Retest Signals: When the price returns to a previously formed FVG without fully mitigating (breaking through) it, the indicator can display retest labels (🎯 for bullish, ⚡ for bearish). This signals that the market is revisiting an area of interest.
• Risk Management: FVGs are best used in conjunction with Market Structure (BOS/CHoCH). Avoid trading isolated FVGs that appear during low-volume consolidation or sideways markets.

Details

The script construction is based on the standard three-candle FVG definition:

1. Bullish FVG: Occurs when the low of the current candle is higher than the high of the candle two periods ago.
2. Bearish FVG: Occurs when the high of the current candle is lower than the low of the candle two periods ago.

The implementation enhances this by calculating a Simple Moving Average (SMA) of volume over a user-defined lookback. It classifies volume as a "spike" if it exceeds the average by a specific multiplier. If the volume spike check is enabled, the script will only plot FVGs that coincide with significant volume, ensuring the imbalance is backed by market activity.

Settings

FVG Settings

• Filter: Prev Candle is High/Low of 2: When enabled, this adds a structural requirement that the middle candle of the FVG pattern must be a local swing high or low.
• Hide Mitigated FVGs: If enabled, the indicator will remove the FVG box from the chart once the price has completely traded through the gap.
• Max Recent Boxes: Sets the maximum number of FVG boxes displayed on the chart at one time.
• Box Duration (Bars): Determines how many bars into the future the FVG box will extend.
• Min Gap Factor (Ticks): The minimum size requirement for a gap to be considered a valid FVG, measured in ticks.

Style

• Bullish/Bearish FVG: Customizes the background color of the FVG zones.
• Bullish/Bearish Border: Customizes the border colors of the FVG zones.

Retest Settings

• Show Retest Signals: Enables or disables the visual labels and background highlights when price retests an active FVG.
• Retest Colors: Customizes the color of the labels and background highlights for bullish and bearish retests.

Volume

• Volume Lookback (Bars): The period used to calculate the average volume.
• Volume Spike Mult: The multiplier applied to the average volume to define what constitutes a "spike."
• Volume Spike check for FVGs: When enabled, only FVGs formed on a volume spike will be displayed.

FAQ

How do I access Volume-Confirmed Fair Value Gaps?

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

Can I use this for automated trading?

Yes, the script includes alert conditions for FVG formation and retests, which can be used with TradingView webhooks or various Algo API integrations for automated execution.

Why are some gaps not appearing on my chart?

This is likely due to the "Volume Spike check" or the "Min Gap Factor" settings. If the gap does not meet the volume or size requirements specified in the settings, it will be filtered out to ensure quality.