Fair Value Gaps as Potential Retracement and Support or Resistance Zones

Summary

This document explains the fair value gap (FVG) indicator as a way to mark price areas where adjacent candles leave an uncovered range. It classifies gaps as bullish or bearish according to the direction of the middle candle, then treats the marked area as a possible support or resistance zone. One suggested approach is to wait for price to revisit a gap and look for a continuation entry; the text also says a gap that remains unfilled may support the existing trend. These are interpretations of price action, not demonstrated market mechanisms.

The indicator draws colored rectangles and internal levels, with a configurable minimum gap range and chart timeframe. The document gives a default range setting and discusses adjusting sensitivity for market volatility, as well as using other indicators for context. It provides no backtest, statistics, or evidence that gaps reliably fill or predict reversals. Its setup rules and descriptions also leave room for implementation differences, so traders would need to define the pattern precisely and test it with risk controls before use.

Key ideas

• An FVG marks a price range left uncovered by the ranges of neighboring candles.
• The indicator labels gaps bullish or bearish based on the middle candle’s direction.
• The document proposes gap retests as possible entries and treats gaps as potential support or resistance.
• A configurable minimum range and timeframe affect which gaps are displayed.
• The document supplies no performance evidence, and gap fills or trend continuation are not guaranteed.

Tags

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