Trend-Filtered Inverted Fair Value Gap Entries with ATR Stops

Summary

This strategy combines fair value gap structure with a moving-average trend filter and volatility-aware trade management. It identifies price gaps, looks for a reversal that inverts the gap, and uses the relative position of shorter and longer simple moving averages to define the permitted trade direction. The stated entry rules require an inverted gap and alignment with the broader trend. Initial exits use fixed percentage stop and profit levels, with an ATR-based trailing stop intended to protect gains after price moves favorably.

The document supplies example rules and script excerpts, but gives no measured results to show that the signals are predictive. It highlights risks from frequent or low-quality gaps, moving-average errors in ranging markets, tight stops in volatile instruments, and sensitivity to parameter selection. The described rules also mix fixed percentage exits with a trailing mechanism, so their behavior depends on implementation details. Proposed extensions include higher-timeframe alignment, volume confirmation, adaptive risk settings, and position sizing based on risk.

Key ideas

• Fair value gaps are identified from separated candle ranges, and a reversal through a gap is treated as an inverted gap signal.
• A short and a long simple moving average define the trend direction used to filter entries.
• The strategy pairs fixed percentage initial exits with an ATR-based trailing stop after a favorable move.
• Gap reliability, sideways markets, stop distance, and parameter sensitivity are material limitations.
• The document outlines the method but provides no performance evidence establishing an edge.

Tags

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