Fair Value Gap Continuation Framework — Strategy by AIScripts
By AIScripts
Performance Metrics
- Author: AIScripts
- Symbol: NASDAQ:NBIS
- Timeframe: 1 month
- Win Rate: 45.5%
- Profit Factor: 2.57
Description
OverviewThis strategy studies how price interacts with Fair Value Gaps (FVGs), which are areas that can form after strong directional price movement.The script identifies potential imbalance zones and monitors future price interaction with those areas. Rather than entering immediately after a gap forms, the strategy waits for price to revisit the zone and show signs of continuing in the original direction.The objective is to explore how imbalance zones may be incorporated into a rules-based trading framework.What Is a Fair Value Gap?A Fair Value Gap is commonly described as an area created when price moves rapidly, leaving a gap between portions of surrounding candles.In this script:Bullish gaps are identified after upward displacement.Bearish gaps are identified after downward displacement.Previously identified zones remain available for future analysis when price revisits them.Strategy LogicGap IdentificationThe script searches for simple three-candle imbalance patterns that may indicate a Fair Value Gap.Zone RetestOnce a gap has been identified, the strategy waits for price to return to that area.Continuation ConfirmationA trade is considered only after price revisits the zone and closes back in the direction of the original move.Risk ManagementStop-loss and target levels are calculated using ATR, allowing risk parameters to adapt to changing volatility conditions.FeaturesFair Value Gap detectionRetest-based entriesATR-based risk managementTrend continuation frameworkResearch and testing focused designIntended UseThis script is designed as an educational example demonstrating one approach to identifying and testing Fair Value Gap behavior.It may be used to study:Price imbalancesRetest behaviorTrend continuation conceptsVolatility-adjusted exitsUsers may choose to modify parameters and test the script across different symbols and timeframes.NotesFair Value Gap concepts are interpreted differently by different traders. This script provides one simplified implementation and should not be considered a complete representation of all Fair Value Gap methodologies.DisclaimerThis script is provided for educational and research purposes only. It demonstrates one method of identifying and testing Fair Value Gap behavior using Pine Script. The script does not predict future market direction and should be evaluated through independent testing before being incorporated into any trading process.