Detecting and Tracking Fair Value Gaps on Price Charts
Summary
The Imbalance Finder identifies bullish and bearish Fair Value Gaps, also called imbalances, using a three-candle pattern: the first and third candles' wicks do not overlap around the middle candle. It draws the resulting zones on a chart and monitors later price action to distinguish a partial interaction, or tap, from a complete fill. The document describes these zones as potential support or resistance areas used in Smart Money Concepts approaches.
Active gaps are shown as colored rectangles; overlays indicate penetrated portions, and a filled zone changes to a filled-state display. The indicator also exposes buffers for gap presence, tap and fill status, price reached, and interaction direction, so an Expert Advisor or another indicator can consume the data. Historical gaps are recalculated on initial load, while later bars and open gaps are updated as new price data arrives. The document explains detection and display behavior but gives no market, timeframe, validation study, or evidence that gaps reliably predict price movement.
Key ideas
- A Fair Value Gap is identified when the first and third candles' wicks do not overlap around the middle candle.
- The indicator classifies gaps as bullish or bearish and tracks subsequent taps and complete fills.
- Chart overlays distinguish active zones from portions that price has entered or fully consumed.
- Data buffers expose gap and interaction states for use by automated trading tools.
- The document gives no empirical evidence that these zones predict future price action.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.