FVG - Nibz

How it works

The Fair Value Gap (FVG) indicator detects price imbalances by analyzing candlestick patterns and relationships between consecutive bars. For bullish FVGs, it identifies scenarios where the low of a previous candlestick is less than the current bar's open, and the current bar's high exceeds the previous bar's close.

Similarly, for bearish FVGs, the script recognizes price inefficiencies when the high of a previous candlestick is greater than the current bar's open, and the current bar's low falls below the previous bar's close. When these conditions are met, the indicator automatically draws colored boxes representing the identified price gaps.

Why it may be useful

Fair Value Gaps provide traders with critical insights into market dynamics by revealing potential areas of price inefficiency and market imbalance. These zones often act as magnetic points where price might return, offering valuable information about potential support, resistance, and potential trend reversals.

By highlighting these price inefficiencies, traders can gain a deeper understanding of market structure and make more informed trading decisions. The visual representation of these gaps helps traders quickly identify key levels that might otherwise be overlooked, enhancing their ability to predict and respond to potential market movements.

When to explore it

The Fair Value Gap indicator is most effective in markets with clear price movements and identifiable momentum, such as forex, stocks, and cryptocurrency trading. Traders can utilize this tool during periods of significant market activity, where price tends to move more dynamically and create noticeable imbalances.

It works particularly well when combined with other technical analysis tools, helping to confirm signals and provide additional context for potential trade entries and exits. Traders should pay special attention to FVG zones during trending markets, consolidation periods, and when seeking to identify potential reversal or continuation points.

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