Using Fair Value Gap Retests as Conditional Entry Signals

Summary

This indicator identifies fair value gaps from a three-candle pattern: a fast price move leaves a zone between the first and third candles’ wicks that the middle candle’s body does not cover. It draws bullish and bearish zones, marks each zone’s midpoint, and signals when price first returns to a zone. A zone stops generating signals after that initial touch. An optional RSI filter can further restrict buy and sell alerts.

The document recommends the 15-minute chart for Gold, says hourly charts produce fewer signals, and cautions that very short timeframes can create noisy zones. It offers no backtest statistics or evidence for the claim that price usually revisits these areas. The signal is presented as a point of interest rather than a complete trading decision: the author suggests considering higher-timeframe support or resistance, avoiding entries against a clear trend, and placing stops outside the zone. Performance across instruments and market conditions remains unestablished.

Key ideas

• A fair value gap is defined by a rapid move that leaves an uncovered area across a three-candle pattern.
• The indicator signals the first retest of a bullish or bearish zone and then marks it as triggered.
• An optional RSI filter can constrain signals, with the midpoint of a zone shown as a reference level.
• The document recommends 15-minute Gold charts but provides no quantified performance evidence.
• It advises using trend context and higher-timeframe support or resistance, with stops outside the zone.

Tags

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