Fair Value Gap Entries with Trend Filtering and Risk-Based Sizing

Summary

This strategy detects bullish and bearish fair value gaps using candle relationships across the current or selected timeframe, with a body-size threshold to filter smaller formations. It can require the direction of an IIR low-pass trend filter to agree with the gap signal. For entries, the gap edge defines the stop level, and a configurable risk/reward ratio determines the target. Position size is calculated from either a percentage of equity or a fixed cash risk, then limited by a cap tied to equity and price.

The document lists settings and a Binance ETH_USDT futures backtest configuration, but it gives no return, drawdown, or trade-count results. The multi-timeframe data requests use lookahead, which may expose future higher-timeframe values in historical calculations and make apparent signals unreliable. Gap detection, order fills, and sizing therefore need independent validation before the strategy’s behavior can be assessed; promotional claims in the description are not supported by reported evidence.

Key ideas

• Fair value gaps are identified by comparing current candle extremes with those from two bars earlier.
• An IIR low-pass filter can be used to restrict entries to the filter’s current direction.
• Stops are placed at gap edges, with take-profit distances set by a risk/reward parameter.
• Position size is based on percentage or fixed cash risk and constrained by an equity-related cap.
• The published multi-timeframe requests use lookahead, and no performance evidence is reported.

Tags

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