Trading Fair Value Gap Retests with Fixed Risk and Intraday Exits

Summary

This intraday strategy identifies bullish and bearish fair value gaps (FVGs) with three-candle price patterns, interpreting them as zones of imbalance. It waits for price to revisit a gap before entering in the corresponding direction. Stops are placed at the far boundary of the gap, and profit targets are set at twice the entry-to-stop distance. The rules also call for closing positions at 3:15 p.m. India Standard Time and permit up to five same-direction entries.

The document describes the method and its risk controls but supplies no measured performance results. It warns that sideways conditions may produce repeated losses, multiple positions can increase exposure, and fixed targets or timed exits may not suit every market. The approach also lacks trend and volume filters. The text proposes testing additional filters and adapting exits and position sizes, while noting that historical patterns may not persist. These are possible refinements, not evidence that the strategy is profitable.

Key ideas

• Three-candle conditions define bullish and bearish fair value gap zones.
• Entries wait for price to revisit a gap and trade in its indicated direction.
• Stops sit at the opposite gap boundary, with targets set at a fixed two-to-one reward-to-risk distance.
• A daily timed close and a limit on same-direction entries shape exposure.
• The document offers no performance evidence and flags risks from chop, stacking trades, and unfiltered signals.

Tags

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