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Fair Value Gap Momentum Entries with EMA, Volume, and ATR Exits

Article Strategy library · Author: ianzeng123
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Summary

This strategy seeks directional trades from fair value gaps (FVGs), filtered by trend, volume, and price movement. It uses the relationship between 50-period and 200-period EMAs to set the trend direction. An FVG is considered actionable when volume exceeds 1.5 times its 20-period average and the absolute candle body is above its 20-period average. The source defines bullish and bearish gaps using prices two bars apart, then enters in the direction of the EMA trend.

Exits are set using a 14-period average true range (ATR): the described take-profit distance is twice ATR and the stop distance is 1.2 times ATR. The published backtest settings specify ETH/USDT on Binance spot data over roughly a year, but the document gives no performance results. Its high-frequency characterization is not demonstrated by those daily settings. The approach may produce false signals in sideways markets, depends on reliable volume data, and may have stops that are too tight during sharp volatility.

Key ideas

  • The strategy uses the 50-period and 200-period EMA relationship to determine trade direction.
  • It filters fair value gaps with elevated volume and a larger-than-average candle body.
  • The source defines gaps by comparing highs and lows across a two-bar separation.
  • ATR-based exits use a take-profit distance of two ATR and a stop distance of 1.2 ATR.
  • Published settings describe an ETH/USDT backtest, but no performance results are provided.

Tags

CryptoSpot marketsMomentumTechnical indicatorsRisk management

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