Three-Bar Fair Value Gap Signals for Long and Short Entries

Summary

This short strategy identifies bullish and bearish fair value gaps using the high and low of a three-bar sequence. A bullish signal occurs when the first bar’s high is below the third bar’s low; a bearish signal occurs when the first bar’s low is above the third bar’s high. The script marks detected gaps on the chart and enters long or short positions in the corresponding direction. It can also draw a box over the gap region.

The document presents a basic signal template rather than a complete trading system: it specifies no explicit exit logic, protective stops, position sizing rules, or entry filters. The accompanying author comment describes the strategy as needing refinement and further backtesting, while offering an unverified win-rate estimate and speculation about machine-learning changes. No test conditions, market, timeframe, or supporting performance data are supplied, so those claims do not establish an edge or expected results.

Key ideas

• A bullish gap is detected when the earlier bar’s high lies below the later bar’s low.
• A bearish gap is detected when the earlier bar’s low lies above the later bar’s high.
• The script enters in the direction of the detected gap and optionally highlights its price zone.
• The document provides no defined exits or risk controls and gives no reproducible performance evidence.

Tags

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