Fair Value Gap [LuxAlgo]

22 Ogo 2022

Fair value gaps (FVG) highlight imbalances areas between market participants and have become popular amongst technical analysts. The following script aims to display fair value gaps alongside the percentage of filled gaps and the average duration (in bars) before gaps are filled.

Users can be alerted when an FVG is filled using the alerts built into this script.

🔶 USAGE



In practice, FVG's highlight areas of support (bullish FVG) and resistances (bearish FVG). Once a gap is filled, suggesting the end of the imbalance, we can expect the price to reverse.

This approach is more contrarian in nature, users wishing to use a more trend-following approach can use the identification of FVG as direct signals, going long with the identification of a bullish FVG, and short with a bearish FVG.

🔹Mitigation

By default, the script highlights the areas of only unmitigated FVG's. Users can however highlight the mitigation level of mitigated FVG's, that is the lower extremity of bullish FVG's and the upper extremity of bearish FVG's.



The user can track the evolution of a mitigated FVG's using the "Dynamic" setting.

🔹Threshold



The gap height can be used to determine the degree of imbalance between buying and selling market participants. Users can filter fair value gaps based on the gap height using the "Threshold %" setting. Using the "Auto" will make use of an automatic threshold, only keeping more volatile FVG's.

🔶 DETAILS

We use the following rules for detecting FVG's in this script:

Bullish FVG

• low > high(t-2)
  
• close(t-1) > high(t-2)
  
• (low - high(t-2)) / high(t-2) > threshold
  

Upper Bullish FVG = low
Lower Bullish FVG = high(t-2)

Bearish FVG

• high < low(t-2)
  
• close(t-1) < low(t-2)
  
• (low(t-2) - high) / high < -threshold
  

Upper Bearish FVG = low(t-2)
Lower Bearish FVG = high

🔶 SETTINGS

• Threshold %: Threshold percentage used to filter our FVG's based on their height.
  
• Auto Threshold: Use the cumulative mean of relative FVG heights as threshold.
  
• Unmitigatted Levels: Extent the mitigation level of the number of unmitigated FVG's set by the user.
  
• Mitigation Levels: Show the mitigation levels of mitigated FVG's.
  
• Timeframe : Timeframe of the price data used to detect FVG's.
  

5 Okt 2022

Nota Keluaran

Minor changes.

18 Jul 2023

Nota Keluaran

- Added new Fair Value Gap styling
- Changed defaults
- Minor changes

28 Jul 2023

Nota Keluaran

- Changed threshold input step to 0.1
- Changed auto threshold, allowing for more frequent fair value gaps