Fair Value Gaps
Overview
The Fair Value Gaps feature is a dynamic tool designed to automatically identify and plot Fair Value Gaps on your chart. This feature is enhanced by a built-in quality filter, which enables users to focus on significant Fair Value Gaps rather than every gap that appears. By highlighting the more impactful gaps, this tool offers users a potential edge in market analysis, allowing for more targeted and effective trading strategies.
Settings
You can enable the Fair Value Gaps feature in your indicator settings:
| Fair Value Gaps Settings | Description |
|---|---|
Fair Value Gaps 1 | Choose the timeframe for viewing Fair Value Gaps. |
Fair Value Gaps 2 | Choose the timeframe for viewing Fair Value Gaps. |
Mitigation Mode | Selects the method to address Fair Value Gaps. - Close: Removes gaps when the price breaks and closes through. - Reduce: Reduces gaps when the price touches them. |
Extend Box | Expands the Fair Value Gap display. |
Quality Filter | Filters out insignificant Fair Value Gaps. |
Key Levels | Shows key levels within Fair Value Gaps. - Disabled: No key level display. - Half: Key levels at the gap's middle. |
Show Text | Displays text for Fair Value Gaps. |
Best Practices & Usage
Prioritize Significant Gaps: Utilize the quality filter to concentrate on the most significant Fair Value Gaps. These gaps are likely to be more impactful and relevant to market movements.
Incorporate into Market Analysis: Integrate Fair Value Gaps into your broader market analysis. These gaps can provide insights into market sentiment and potential areas of price movement.
Use as Potential Entry or Exit Points: Consider using significant Fair Value Gaps as potential entry or exit points. Prices often return to these gaps, making them strategic locations for trading decisions.
Risk Management: Apply Fair Value Gaps in your risk management plan. Be aware of the potential for rapid price movements in and around these gaps and set stop-loss orders accordingly.
Combine with Other Indicators: For a more comprehensive analysis, use Fair Value Gaps in conjunction with our other technical indicators. This can help in validating the strength and potential impact of these gaps.
Historical Gap Analysis: Review how the market has previously reacted to Fair Value Gaps. This historical perspective can offer valuable insights for future trading strategies.
Examples
The example below shows how a bullish Fair Value Gap is detected which led to a consistent bullish market trend.
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