Fair Value Gap Retests with Trend and ATR-Based Exits

Summary

This framework identifies simple three-candle fair value gaps and treats them as potential imbalance zones. It records the latest bullish and bearish zones, then waits for price to revisit a boundary and close back in the direction of the move. A trend filter requires price to be above an exponential moving average for long entries or below it for shorts. The described approach therefore combines gap retests with trend continuation rather than entering as soon as a gap appears.

Stops and profit targets are set using average true range, with a configurable reward-to-risk multiple. The document provides rules and a script, but no backtest results or evidence that the approach is profitable. Its notes frame the script as educational and acknowledge that fair value gaps can be interpreted differently. The rules also retain the latest detected zone for later retests, so users should examine how that choice behaves across instruments and timeframes before drawing conclusions.

Key ideas

• The strategy detects bullish and bearish gaps from three-candle price relationships.
• It waits for price to revisit a gap boundary and close back toward the original move.
• An exponential moving average filters entries according to the prevailing price trend.
• Average true range sets stop distance, while a reward-to-risk input determines the target.
• The document describes an educational framework but supplies no performance results.

Tags

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