Trading Fair Value Gaps with Trend Context and Market Structure Shifts
Summary
The article presents a discretionary and automated approach to fair value gaps (FVGs), treating them as price areas left by rapid directional moves. It proposes mapping gaps from higher to lower timeframes, establishing trend bias with price structure and moving averages, and identifying nearby prior highs or lows as liquidity targets. The central entry process waits for price to revisit a gap, seeks a directional engulfing candle on a lower timeframe, then looks for a market structure break before entry; stops are placed beyond the opposing side of the break.
The examples and rationale are mainly descriptive, with gold and major scheduled news offered as contexts where sharp moves may form gaps. The author asserts that gaps are often revisited and can propel continuation, but supplies no systematic statistical evidence for the claimed frequency or edge. The method is vulnerable to subjective gap and structure definitions, changing conditions, and target proximity; the article advises testing the automated approach on demo accounts and reviewing performance logs before live use.
Key ideas
- The method defines FVGs as imbalanced price regions left by fast directional expansion.
- Higher timeframe trend and nearby liquidity targets provide context for whether a gap may support continuation.
- The proposed entry sequence combines a gap revisit, a directional engulfing candle, and a lower timeframe structure break.
- Stops are placed beyond the opposite side of the structure break, with entries taken around the break or a pullback.
- Claims about gap revisits and trade effectiveness are not backed by systematic performance evidence in the article.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.