Trading Fair Value Gap Retracements After a Break of Structure
Summary
The strategy combines a three-candle fair value gap with a directional break of a recent swing high or low. It records confirmed structure breaks, accepts gaps that form within a configurable bar window in the same direction, and enters when price retraces into the stored gap and closes within its bounds. Stops sit just beyond the gap, while profit targets use an ATR multiple to adapt distance to recent volatility.
The accompanying discussion argues that structure context may help filter gaps formed during weak or ranging price action, and recommends testing across different market regimes and parameter settings. It provides no backtest results or evidence that the filter improves returns. Performance will depend on swing and gap-age settings, instrument, timeframe, and execution assumptions. The source defines stop and target behavior but does not establish that its stated rationale or example parameters produce a durable edge.
Key ideas
- A bullish gap is considered only after a recent confirmed break above a swing high, with the reverse rule for bearish setups.
- A trade triggers when price revisits the gap and closes back within its boundaries.
- Stops are placed beyond the gap with an ATR-based buffer, and targets use an ATR multiple.
- Swing lookback and gap expiry affect both setup frequency and selectivity.
- The document offers testing suggestions but reports no measured strategy performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.