Three-Bar Fair Value Gaps as Directional Entry Signals

Summary

This script identifies a bullish gap when the high from two bars earlier is below the current bar’s low, and a bearish gap when the earlier low is above the current high. Each detected gap immediately triggers a long or short entry, and the script can draw a box over the gap area. The document presents this as a basic fair value gap strategy template rather than a fully developed trading system.

The author reports a win rate of about 30–39% and suggests further backtesting and modifications, including machine-learning additions, as possible ways to improve it. No test period, market, trade count, risk-adjusted results, or exit and risk-management rules are specified, so the reported rate cannot establish robustness or profitability. The suggestion of a higher future win rate is speculative. Without explicit exit logic or evaluation details, the entry conditions alone are insufficient to assess the strategy’s practical performance.

Key ideas

• A bullish gap is flagged when the high two bars earlier is below the current low.
• A bearish gap is flagged when the low two bars earlier is above the current high.
• The script enters long or short as soon as the corresponding gap condition occurs.
• The author reports a 30–39% win rate but supplies no test context or risk-adjusted performance measures.
• Exit rules and risk controls are not described, limiting evaluation of the template.

Tags

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