ICT FVG [TheFundedRoad]

How it works

The Fair Value Gap indicator analyzes three consecutive price candles to identify specific price imbalances or gaps in market structure. It identifies bullish fair value gaps where the first candle's high is lower than the third candle's low, and bearish fair value gaps where the first candle's low is higher than the third candle's high.

Once detected, the indicator draws the fair value gap starting from the second candle, providing traders with a visual representation of potential market inefficiencies. Traders can also customize the indicator's appearance, including color selection and optional midpoint line display, which represents the 50% level of the identified gap.

Why it may be useful

Fair value gaps are crucial for traders because they reveal potential market inefficiencies and areas of price imbalance that can signal potential trading opportunities. By highlighting these gaps, traders can identify potential entry and exit points where price might react or reverse based on the market's structural dynamics.

The visual representation of these gaps helps traders quickly recognize potential trading zones and understand the underlying market structure. This approach provides insights into price movement psychology and can help traders make more informed decisions about market entry and exit strategies.

When to explore it

The Fair Value Gap indicator works best in markets with clear price action and sufficient volatility, such as forex, futures, and highly liquid stock markets. Traders should focus on using this indicator during periods of active trading when price movements are more pronounced and meaningful.

It is particularly effective for traders looking to identify potential market imbalances and trading opportunities in shorter timeframes. Traders should combine this indicator with other technical analysis tools and confirm signals through additional market analysis to improve overall trading accuracy and reduce false signal risks.

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