Fair Value Gap Entries with Equity-Based Stops and Fixed Targets

Summary

This strategy identifies fair value gaps from price relationships across three candles and uses the gap size relative to price as an entry threshold. It is described for a 15-minute chart, with long and short signals taken from bullish and bearish gaps. The stated settings include a 0.5% threshold, a stop based on 1% of account equity, and a fixed take-profit distance of 50 points.

The document reports a backtest from November 2023 to August 2024 with 153 trades, a 71.24% win rate, a 2.422 profit factor, and 284.40% net return. These figures are reported without enough detail here to assess costs, execution assumptions, or robustness; published backtest settings elsewhere give a wider date range and daily periods. The notes identify slippage, threshold sensitivity, false signals, and fixed-target limitations in volatile markets. Suggested extensions include volatility-adjusted targets, trend and timeframe filters, and position sizing tests before live use.

Key ideas

• The method detects bullish and bearish gaps by comparing highs and lows across three candles.
• A percentage threshold filters out gaps that are small relative to price.
• The described risk controls combine an equity-based stop with a fixed-distance profit target.
• The reported backtest lacks enough execution and robustness detail to establish live performance.
• Threshold sensitivity, slippage, and volatility can materially affect results.

Tags

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