FVG Range Filter

5 giorni fa

0x278's FVG Range Filter

Overview

The FVG Range Filter is a TradingView indicator designed to identify and display Fair Value Gaps (FVGs) on your chart. FVGs are areas of price imbalance that often act as significant zones for potential price retracement or reversal. This indicator filters out irrelevant gaps, showing only those that are within a specified price range and time frame, making it easier to focus on high-probability trading opportunities.

This guide is crafted to help both novice and experienced traders understand how to use this indicator effectively, even if you're new to the concept of FVG trading. We'll cover what FVGs are, how the indicator works, how to interpret its visual elements, and how to apply it in various trading scenarios.

What are Fair Value Gaps (FVGs)?

Fair Value Gaps occur when the price of an asset moves so quickly in one direction that it leaves a 'gap' or 'void' on the chart where no trading activity occurred. These gaps represent areas of imbalance between supply and demand, often created by strong buying or selling pressure. Traders use FVGs to identify potential areas where price might return to 'fill' the gap, offering opportunities for entries or exits.

• Bullish FVG: This happens when price jumps upward, leaving a gap below. It suggests strong buying pressure and often acts as a support zone when price retraces.
  
• Bearish FVG: This occurs when price drops sharply, leaving a gap above. It indicates strong selling pressure and often acts as a resistance zone when price retraces.
  

How the FVG Range Filter Works

The FVG Range Filter indicator automatically detects these gaps based on a specific three-bar pattern that identifies significant price imbalances. It then applies filters to ensure only relevant FVGs are displayed:

• Range Filter: Only shows FVGs whose midpoint is within a user-defined percentage of the current price. This keeps the focus on gaps that are close enough to be actionable.
  
• Time Filter: Only displays FVGs that are younger than a specified number of bars, ensuring you're looking at recent and relevant price action.
  
• Invalidation: Once the price trades through the midpoint of an FVG, the gap is considered 'filled' or invalidated, and it is removed from the chart.
  

This filtering mechanism declutters your chart, highlighting only the most pertinent FVGs for your trading decisions.

Indicator Settings

The FVG Range Filter offers customizable inputs to tailor its behavior to your trading style:

• Display Range (%): This sets the percentage range from the current price within which FVGs are shown. A lower value (e.g., 1.0%) shows only gaps very close to the current price, while a higher value (e.g., 5.0%) includes gaps further away. Default is 1.0%.
  
• Look-back Bars: This determines how far back in time the indicator looks for FVGs. It also limits how long a gap remains visible if it hasn't been invalidated. Default is 1000 bars.
  
• Show Bullish FVGs: Toggle to display bullish FVGs (green boxes by default). Default is enabled.
  
• Show Bearish FVGs: Toggle to display bearish FVGs (red boxes by default). Default is enabled.
  
• Box Opacity (0-100): Adjusts the transparency of the FVG boxes on the chart. A value of 0 is fully transparent (invisible), while 100 is fully opaque. Default is 33 for a subtle appearance.
  

Visual Elements and Interpretation

The indicator draws rectangular boxes on your chart to represent FVGs. Understanding these visual elements is key to using the indicator effectively:

• Green Boxes: Represent bullish FVGs. These are areas where price gapped upward, suggesting potential support zones. If price retraces to this area, it might bounce off as buyers step in to defend the level.
  
• Red Boxes: Represent bearish FVGs. These are areas where price gapped downward, indicating potential resistance zones. If price retraces to this area, it might face selling pressure and reverse downward.
  
• Box Position and Extension: Each box starts at the bar where the FVG was detected and extends to the right, updating dynamically as new bars form. This extension helps maintain visibility until the gap is either invalidated or falls out of the look-back period.
  
• Disappearance of Boxes: A box disappears from the chart in two scenarios:
  
  • Price Moves Away: If the midpoint of the FVG moves outside the specified display range percentage from the current price, or if the FVG becomes older than the look-back bars limit, the box is removed (though the gap data persists in memory for potential re-display if conditions are met again).
    
  • Invalidation: If price trades through the midpoint of the FVG (i.e., the low of a candle goes below the midpoint for a bullish FVG, or the high goes above the midpoint for a bearish FVG), the gap is considered filled, and the box is permanently removed from the chart.
    

Trading Scenarios with FVG Range Filter

Below are detailed trading scenarios to help you understand how to use the FVG Range Filter in practical situations. These scenarios assume you're trading with the trend or looking for reversals at key levels.

Scenario 1: Bullish FVG as Support for Long Entry

• Setup: You're trading a stock in an uptrend on a 15-minute chart. The FVG Range Filter displays a green box (bullish FVG) after a sharp upward move earlier in the day.
  
• Interpretation: This green box indicates a zone of imbalance where price gapped up, likely due to strong buying interest. Since it's still within the display range and look-back period, it's a relevant support zone.
  
• Action: Wait for price to retrace back to the top edge of the green box. Look for confirmation of support, such as a bullish candlestick pattern (e.g., hammer or engulfing) or increased volume, indicating buyers are stepping in.
  
• Entry: Enter a long position near the top of the FVG box, setting a stop-loss just below the bottom of the box to protect against a breakdown.
  
• Target: Aim for the next resistance level or a predefined risk-reward ratio (e.g., 1:2). If another bullish FVG forms above, consider that as a potential target.
  
• Exit: Exit the trade if price breaks below the bottom of the FVG (invalidation), or if the box disappears due to price trading through the midpoint, signaling the gap is filled.
  

Scenario 2: Bearish FVG as Resistance for Short Entry

• Setup: You're trading a cryptocurrency on a 1-hour chart during a downtrend. The indicator shows a red box (bearish FVG) after a sharp downward move a few hours ago.
  
• Interpretation: The red box marks a zone where price gapped down, indicating strong selling pressure. As long as it's within the display range and look-back period, it remains a potential resistance zone.
  
• Action: Wait for price to rally back to the bottom edge of the red box. Look for signs of rejection, such as a bearish candlestick pattern (e.g., shooting star or engulfing) or decreasing volume, suggesting sellers are defending this level.
  
• Entry: Enter a short position near the bottom of the FVG box, placing a stop-loss just above the top of the box to guard against a breakout.
  
• Target: Target the next support level or a favorable risk-reward ratio. If a new bearish FVG appears below, it could serve as a potential target.
  
• Exit: Exit if price breaks above the top of the FVG (invalidation), or if the box disappears because price has traded through the midpoint, indicating the gap is no longer relevant.
  

Scenario 3: Filtering Out Irrelevant FVGs During Choppy Markets

• Setup: You're trading forex on a 5-minute chart during a period of consolidation with no clear trend. The chart shows frequent small price jumps, but the FVG Range Filter displays very few boxes.
  
• Interpretation: The indicator is filtering out FVGs that are either too far from the current price (outside the display range percentage) or too old (beyond the look-back bars). This helps avoid false signals in a non-trending market.
  
• Action: Recognize that the absence of FVGs on the chart suggests no high-probability setups at the moment. Avoid forcing trades based on minor price movements that don't meet the filter criteria.
  
• Entry: Wait for a clear trend to emerge and for new FVGs to appear within the filter parameters before considering any trades.
  
• Target/Exit: Follow the trend direction once FVGs are displayed, using the edges of the boxes as potential entry or exit zones as described in the previous scenarios.
  

Scenario 4: Using FVGs for Risk Management

• Setup: You're already in a long position on an index futures contract on a 30-minute chart, and the FVG Range Filter shows a green box below your entry point.
  
• Interpretation: The green box represents a bullish FVG that could act as a support zone. Since price hasn't yet reached the midpoint (which would invalidate the FVG), it remains a valid reference point for managing risk.
  
• Action: Adjust your stop-loss to just below the bottom of the green box. This placement uses the FVG as a logical invalidation level, assuming that a break below this support zone negates the bullish premise of your trade.
  
• Entry: No new entry is needed since you're already in the trade.
  
• Target/Exit: Keep your original target unless a new bearish FVG forms above, which might indicate resistance. Exit if price breaks below the FVG or if the box disappears due to invalidation.
  

Tips for Using the FVG Range Filter

• Combine with Trend Analysis: FVGs are most effective when traded in the direction of the prevailing trend. Use higher timeframe analysis or other indicators to confirm the overall market direction before acting on FVGs.
  
• Adjust Settings for Market Conditions: In volatile markets (like cryptocurrencies), you might increase the display range percentage to capture more FVGs. In less volatile markets (like certain stocks), a tighter range might be more appropriate.
  
• Timeframe Selection: The indicator works on all timeframes, but lower timeframes (1-15 minutes) might show more frequent FVGs for scalping, while higher timeframes (1-4 hours) are better for swing trading with larger, more significant gaps.
  
• Confirmation Tools: Don't rely solely on FVGs for entries. Use additional confirmation from price action (candlestick patterns), volume, or other indicators to increase the probability of success.
  
• Monitor Invalidation: If an FVG box disappears from the chart due to price trading through its midpoint, consider it a signal that the gap is no longer relevant. Adjust your strategy accordingly.
  

Limitations

• Not a Standalone System: The FVG Range Filter identifies potential zones of interest but does not provide entry signals, stop-loss, or take-profit levels on its own. It should be used as part of a broader trading strategy.
  
• Market Conditions: FVGs may be less effective in strongly trending markets where price doesn't retrace to fill gaps, or in very choppy markets where too many small gaps are filtered out.
  
• Lag in Detection: Since FVGs are based on a three-bar pattern, there is a slight delay in identifying them after the price movement has occurred.
  

Good Luck!

The FVG Range Filter is a powerful tool for traders looking to capitalize on price imbalances in the market. By focusing only on relevant Fair Value Gaps within a specified range and time frame, it helps declutter your chart and highlights high-probability zones for potential trades. Whether you're new to FVG trading or an experienced trader, this indicator can enhance your analysis by visually identifying key areas of support and resistance based on market inefficiencies.

Experiment with the settings to match your trading style and market conditions, and always combine the indicator's insights with other forms of analysis for the best results. Happy trading!

5 giorni fa

Note di rilascio

- Added ATR based range auto mode
- Added adjustable text display for the timeframe for more compact display

5 giorni fa

Note di rilascio

- Added tapped/untapped status
- Style settings to change look and feel

5 giorni fa

Note di rilascio

- Updated default styles