Fair value gap
A three-candle price gap between the first and third ranges after a strong middle candle.
What to look for
- Bullish: first high is below third low; reverse for bearish
- Minimum gap is normalised by ATR or tick size
- The middle candle meets an impulse rule
After a strong middle candle, the first candle's high at 102.0 remains below the third candle's low at 103.2. A later pullback enters that space without crossing it fully.
For the bearish version, the first candle's low stays above the third candle's high, and the gap is measured between those two prices.When the pattern is confirmed
A return into the zone plus a defined response, or a continuation rule tested separately.
Where the idea is wrong
Full traversal or close beyond the zone under the chosen definition.
The easy mistake
Terminology can imply hidden order flow that candle data alone cannot verify.
A complete fair value gap example
Mark the literal space between the first candle high and third candle low after a bullish impulse, or the reverse for bearish examples. Require a minimum ATR-normalised width and show the larger price structure.
First rule to test
First touch — enter when price first reaches the frozen gap boundary, with no added confirmation; test this as the more permissive variant.
Alternative rule
Response close — after price enters the gap, wait for a candle to close back in the impulse direction before entering.
Place it where the pattern is wrong
Place the example stop one fixed ATR fraction beyond the far boundary of the original three-candle gap.
Context, trigger and risk
The pattern handles timing. The other tools decide whether the location makes sense and how far normal price movement can reach.
Shows whether the gap supports a larger continuation or sits against nearby structure.
Defines impulse size, minimum gap width and the stop buffer.
Separates active-session impulses from thin-market gaps and feed effects.
First exit to test
Prior extreme — close at the impulse high or low that was visible when the gap formed.
Alternative exit
Fixed-R comparison — close at one preselected multiple of the initial stop distance.
Patterns need a method around them
Open a related strategy to see the wider market filter, entry, stop, exit and no-trade rule.
Trend pullback
Research whether shallow retracements inside an objective trend resume in its direction.
- ENTRY
- After eligibility is true, place a market order at the next H1 open when the signal candle closes beyond the highest high of the previous two pullback bars for a long, or below their lowest low for a short.
- STOP
- Place the stop 0.25 × ATR(14) beyond the pullback extreme. Size so entry-to-stop risk equals 0.50% of demo equity, rounded down to 0.01 lot; never widen the stop.
- EXIT
- Place a fixed target at 2R immediately after entry. If neither stop nor target trades first, exit at market after 24 completed H1 bars.
Multi-timeframe continuation
Aligns a higher-timeframe state with a lower-timeframe trigger without peeking into unfinished bars.
- ENTRY
- Enter at the next M15 open after a candle closes back across EMA(20) in the H4 direction and beyond the prior M15 candle high/low.
- STOP
- Place stop 0.25 × M15 ATR(14) beyond the pullback extreme; risk 0.35% of equity and round down to 0.01 lot.
- EXIT
- Take profit at 2R. Exit early only when a completed M15 candle closes through the stop-side pullback extreme; close unresolved trades after 24 M15 bars.
News-reaction framework
Studies post-release price behaviour while treating spread and slippage as primary variables.
- ENTRY
- From bar three through bar six after release, enter at the next M5 open after a completed close beyond the stabilisation-box high for a positive USD reaction or below its low for a negative USD reaction. For EUR/USD, positive USD means short.
- STOP
- Stop at the opposite side of the stabilisation box. Risk 0.20% of equity, rounded down to 0.01 lot; reject any fill with more than 1.0-pip adverse slippage.
- EXIT
- Take profit at 1.5R or close 12 completed M5 bars after entry, whichever comes first.
Try it on older charts
Measure fill probability, time to fill and post-touch return without discarding unfilled gaps.