Price Action Toolkit: Fair Value Gaps
A Fair Value Gap (FVG) is an imbalance between buyers and sellers in the market, leaving a ‘gap’ where price will fill or return to rebalance unfilled orders. The Price Action Toolkit automatically identifies and plots FVGs on your chart. Below we’ve outlined how each setting and feature works.
Settings
Volumetric Info
Enabling volumetric information adds a layer of analysis by associating volume data with FVGs. This helps traders assess the strength and reliability of the gaps. Volume profiles for each FVG display total volume, high/low volume ratios, and visual representations of volume activity within the gap.
Total Volume: Displays the combined volume for the bars that form the FVG, providing a clear indication of market participation in the gap
Percentage Ratio: Shows the proportion of high vs. low volume within the FVG:
Low Percentage: Indicates dominance of buyers or sellers, depending on the FVG direction.
High Percentage: Indicates reduced volume support for the FVG's direction, suggesting the gap may be less reliable.
Volume Bars Visualization: Displays the buying versus selling volume in the FVG.
Zone Invalidation
The Zone Invalidation settings allows traders to choose how an FVG is invalidated by the Price Action Toolkit.
Close: A candle must close above a below FVG or above a bearish FVG to invalidate it.
Wick: A candle’s wick must go below a bullish FVG or above a bearish FVG to invalidate it.
Zone Filtering
The Zone Filtering setting allows traders to choose how FVGs are filtered by the Price Action Toolkit.
Average True Range: An FVG's size must be greater than the Average True Range (ATR) to be validated and displayed on your chart.
Volume Threshold: An FVG must have short-term volume greater than the long-term volume by at least the specified 'Volume Threshold %' setting to be validated and displayed on your chart.
Volume Threshold
The Volume Threshold setting sets how much higher the short-term volume must be compared to the long-term volume for an FVG to be validated and displayed. This setting only applies when the Zone Filtering setting is set to ‘Volume Threshold’.
FVG Detection
The FVG Detection setting determines what types of FVGs are detected and displayed by the Price Action Toolkit.
Same Type: All three candles forming the FVG must be bullish or bearish.
All: The three candles forming an FVG don’t have to all be bullish or bearish.
Detection Sensitivity
The Detection Sensitivity adjusts how strict the indicator is when identifying FVGs based on the size/height of the FVG. You can choose between low, normal, high, and extreme. Extreme detects more FVGs while low only detects FVGs with significant price displacement.
You can toggle Detection Sensitivity on or off. When off, the indicator detects all FVGs without filtering.
Combine Zones
Enabling the 'Combine Zones' setting merges overlapping FVGs of the same type into a single larger zone, reducing chart clutter.
Allow Gaps Between Bars
When enabled, FVGs are detected even when there are price gaps between bars, which is useful for assets with gap-up openings like stocks and futures.
