Fair Value Gap & Gap Profile [BigBeluga]

Aug 26

This indicator is designed to help traders identify and utilize fair value gaps on price charts and analyze volume at these points. These gaps, formed by significant price movements, can act as key support and resistance levels. The indicator enhances trading strategies by visually representing these gaps, making it easier for traders to spot potential entry and exit points.

⦿ What Is A Fair Value Gap?

Before diving into the practical use of the Fair Value Gap in trading, it's crucial to have a clear understanding of what it is and how to identify it on your charts. The Fair Value Gap, or FVG, is a widely utilized tool among price action traders to detect market inefficiencies or imbalances. Sometimes you will even see them labeled as inefficiencies by other traders. These imbalances arise when buying or selling pressure is significant, resulting in a large upward or downward move, leaving behind an imbalance in the market.

The idea behind FVGs is that the market will eventually come back to these inefficiencies in the market before continuing in the same direction as the initial impulsive move. FVGs are important since traders can achieve an edge in the market. Price action traders can also use these imbalances as entry or exit points in the market.

By visually representing gaps and their profile, the Fair Value Gap (FVG) & Gap Profile indicator provides a historical overview of gaps within a specified lookback period, showing the distribution and density of gaps across different price levels. This insight helps traders identify zones where the price tends to move more fluidly, often encountering less resistance. High points on the Gap Profile indicate areas where gaps have occurred frequently in the past, which could serve as potential breakout or breakdown zones.


⦿ Key Features:

● Gap Detection and Visualization:

• - Identifies Bullish and Bearish Gaps: Highlights gaps where the price moved significantly up or down along with a volume. Intensivity of color show strength of FVG by volume
  
• - Filter for Significant Gaps: Allows users to filter out insignificant gaps, ensuring only relevant gaps are displayed.
  

● Customizable Display Options:

• - Shows Filled Gaps: Option to display gaps that have been filled, aiding in the analysis of historical price movements.
  
• - Displays Filled Gap Levels: Highlights the levels of filled gaps.
  

● Gap Profile:
Gap Profile Insight: The Gap Profile feature shows the distribution of gaps over a specified lookback period. High points on the FVG Profile indicate areas with a significant number of gaps in the past. These high points are signs of low resistance for price movement. Consequently, at these points, the price tends to move more easily without encountering strong resistance. Traders can use this information to identify potential breakout or breakdown zones where price action is likely to be more fluid.



● Grab Liquidity Detection:

• - Collect liquidity Signals: Plots markers on the chart where price interacts with gap levels, providing potential trade signals based on liquidity.
  

⦿ How Traders Can Use This Indicator:

• - Plan Trades: Use gaps as potential entry and exit points, based on whether the price is approaching, filling, or moving away from a gap.
  
• - Analyze Market Trends: Understand historical price movements by analyzing filled gaps and their impact on current price action.
  
  
• - Analyze Gap Profile: Identify zones where the price tends to move more fluidly, often encountering less resistance. High points on the Gap Profile indicate areas where gaps have occurred frequently in the past, which could serve as potential breakout or breakdown zones.
  
  
• - Price imbalance: market will eventually come back to these inefficiencies and fill them. inefficiencies or imbalances in the market usually act as a magnet for price.
  

By incorporating the Fair Value Gap & Gap Profile [BigBeluga] indicator into their trading strategy, traders can gain a clearer understanding of market dynamics and make more informed trading decisions.