Detecting and Tracking Fair Value Gaps Across Timeframes

Summary

This indicator identifies price gaps by comparing a bar’s high and low with the corresponding extremes from two bars earlier. When the ranges do not overlap, it marks a bullish or bearish fair value gap and extends the zone on the chart. The script can scan the current timeframe, a selected higher timeframe, or both, and can label zones by timeframe.

As price moves into a zone, the indicator updates its remaining boundaries; users can choose to treat a midpoint touch as a fill and either delete completed zones or leave them on the chart. The document presents gaps as possible targets on the premise that they are often filled, and suggests using higher-timeframe zones for broader context. It offers no statistical evidence that gaps predict price movement or reliably fill. The author cautions against requesting lower-timeframe data through the higher-timeframe setting, and the indicator’s usefulness depends on its gap definition, settings, and market context.

Key ideas

• A gap is detected when the current bar’s range does not overlap the range from two bars earlier.
• The indicator can display current-timeframe zones, higher-timeframe zones, or both.
• Zones can be tracked until price reaches the boundary or, optionally, the midpoint.
• The document presents gaps as potential targets but gives no measured evidence of their fill rate.
• The author recommends using higher-timeframe data in the multi-timeframe feature.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.