Fair Value Gap (FVG)
Fair value gaps can be a very useful concept in price action trading. They detect instances in which there are inefficiencies, or imbalances, in the market. In this case, we define imbalance as an instance in which buying and selling is not equal. This is often visualised as a large candle whose neighbouring candles’ wicks do not fully overlap the large candle. Below are a few examples of Fair Value Gap.
If price is in a downtrend and there is a fair value gap above, a trader might look to go short when that FVG fills. Inversely, if price is in an uptrend and there is a FVG below, a trader might look to go long when the FVG fills.
In this script we decided to highlight both types, one is simply marking up all technical FVGs which is the gap produced by the large candle, the other more commonly traded ones are market structure breaking ones.
These ones tend to be more respected so note they are highlighted in a separate colour to make them more visible.
If a FVG has been filled that box will dim away so it's not in your way.Multi Time Frame FVG
In one of our first updates we have added the option to display multi time frame FVG's this has been very popular within our community. If you follow the FVG trading stratgies the majority of them invole using multi time frame conditions and this is part of the reason why we have added this feature.
If you are unfamiliar with FVG trading strategies you can watch our smart money concept video or we have also done a separate video of the MTF FVG update which goes over the strategy.
You have 3 types of FVG, the first one will display all FVG gaps, the 2nd will only display FVGs which are presented in a market structure break. Market Structure breaking FVGs tend to be respected more however that doesn’t mean that you can’t make some excellent trades from the traditional ones. The third one is for the Multi time frame FVG.
You can change the colours of all of these along with their label colours and you can decide what happens to the FVG box onces price reaches it. By default it will turn to a faded colour however if you want to make it invisible you can set the opacity of them to 0% in its colour settings.