16216
by xard777
OK, Here are a couple of questions on FVG that I asked GPT4o (June 2024 ver)
Tell me what you know about FVG (Fair Market Gaps) and how I can implement it into my intraday trading strategy?
Fair Value Gaps (FVGs) are a concept that focuses on the price levels where there was an imbalance between supply and demand in the market, causing prices to move quickly through certain price levels without much trading activity. These gaps often provide insights into potential future price movements and can be used to develop effective intraday trading strategies. Here is a comprehensive guide on FVGs and how to incorporate them into intraday trading:
### Understanding Fair Value Gaps (FVGs)
1. **Definition**: Fair Value Gaps are areas on the price chart where price moves rapidly between two levels without much trading activity. These gaps are perceived to occur because there was a strong imbalance between buyers and sellers at these price levels.
2. **Identification**:
- An FVG can be identified when there is a sudden and sharp move in price, often accompanied by high volatility and volume.
- It is often seen when there is a significant news release or economic event.
3. **Types of Gaps**:
- **Breakaway Gaps**: These occur at the beginning of a new trend, often breaking out of a range or pattern.
- **Runaway (Continuation) Gaps**: These happen in the middle of a trend and signal the continuation of the existing trend.
- **Exhaustion Gaps**: These appear near the end of a trend and can signal a reversal or exhaustion of the current trend.
4. **Implications**:
- **Price Retracements**: Markets often retrace to fill these gaps, as the price is drawn back to balance the order flow. This is because fair value is perceived to lie within the gap area.
- **Support and Resistance Levels**: These gaps can act as significant support or resistance levels. Once a gap is filled, these levels can become strong areas where price action can reverse or consolidate.
### Implementing FVGs into Intraday Trading Strategy
1. **Gap Analysis**:
- Perform a daily pre-market analysis to identify any FVGs from the previous trading sessions. This sets the stage for potential price targets and support/resistance levels for intraday trade setups.
2. **Entry Strategies**:
- **Gap Fill Strategy**: Look for price to move towards and fill the FVG identified. Enter trades near the gap boundaries with tight stops and predefined take profit levels.
- **Breakout Setup**: Use FVGs to identify breakout opportunities. If the price gaps above a resistance level or below a support level with strong volume, it may indicate the start of a significant trend.
3. **Volume Analysis**:
- Confirm FVGs using volume analysis. High volume during the gap formation confirms the strength of the move. Low volume during the gap fill indicates that the move may be a weak retracement.
4. **Order Flow Analysis**:
- Use order flow tools or market depth tools (like Level II data) to detect imbalances in buying/selling interest at the gap levels. This can help in accurately predicting whether the gap will fill or if the price will use it as a bounce point.
5. **Risk Management**:
- Place stop-loss orders just beyond the boundaries of the FVG to limit potential losses if the market moves against your trade.
- Use position sizing techniques to ensure risk is controlled on every trade, especially when trading around volatile areas like gaps.
6. **Backtesting and Optimization**:
- Backtest your strategies using historical data to determine the effectiveness of trading around FVGs.
- Continuously optimize the criteria for identifying and trading FVGs based on changing market conditions and your risk tolerance.
### Practical Example
Suppose you identify an FVG in the S&P 500 futures market created by a strong upward move due to significant economic news. You notice this gap hasn't been filled yet.
- **Gap Fill Strategy**: You may place a buy order at the lower boundary of the gap, believing the price will move back up to fill the gap. Your stop-loss could be placed just below this lower boundary to manage risk.
- **Breakout Setup**: If you see price breaking out above the upper boundary of the FVG with high volume, you might enter long, expecting the trend to continue upwards. Here, your stop-loss would be placed just below the breakout level.
Implementing FVGs in your intraday trading strategy involves a keen eye for identifying these gaps, confirming them with volume/order flow, and executing trades with disciplined risk management. With practice and refinement, FVGs can become a valuable tool in your trading arsenal.
Using FVG in intraday trading to identify gap and direction and layer in trades using previous gaps as a trailing stop within the intraday move.
Certainly! Let's focus on a detailed approach to using Fair Value Gaps (FVGs) in intraday trading to identify gaps, determine trade direction, and layer in trades, using previous gaps as trailing stops.
### Comprehensive FVG-Based Intraday Trading Strategy on MT4
#### Step-by-Step Strategy Outline
1. **Identifying Fair Value Gaps (FVGs)**
2. **Determining Trade Direction**
3. **Layering in Trades**
4. **Using Previous Gaps as Trailing Stops**
### 1. Identifying Fair Value Gaps (FVGs)
#### **Concept**
Fair Value Gaps are areas where price moves rapidly due to supply and demand imbalances, resulting in low trading volume at these levels. Identifying these gaps correctly is crucial for this strategy.
#### **Setup on MT4**
- **Custom Indicator**: Develop an MQL4 script to scan for FVGs based on criteria like a minimum percentage move relative to ATR and above-average volume.
- **Volume Profile Indicator**: Use a Volume Profile plugin to highlight areas with low volume nodes, indicating potential FVGs.
#### **Example**
Create an MQL4 script to highlight gaps where the price moved more than 1% of the ATR in a single candlestick, with the corresponding volume spike at least double the average volume of the past 20 periods. The script will visually mark the FVG on the MT4 chart.
---
### 2. Determining Trade Direction
#### **Concept**
Once an FVG is identified, the direction of the trade will be based on the prevailing market trend and the price action around the gap.
#### **Setup on MT4**
- **Trend Indicators**: Use Moving Averages (e.g., 50 EMA and 200 EMA) to identify the market trend.
- **Momentum Indicators**: Utilize RSI or MACD to confirm the strength of the trend.
#### **Example**
1. **Upward FVG Identification**: Spot a bullish FVG during an uptrend (50 EMA above 200 EMA). Confirm with RSI above 50.
2. **Downward FVG Identification**: Spot a bearish FVG during a downtrend (50 EMA below 200 EMA). Confirm with RSI below 50.
---
### 3. Layering in Trades
#### **Concept**
Layering trades within the FVG involves placing multiple entry orders at different price levels within the identified gap. This strategy helps in averaging your entry price and maximizing potential gains.
#### **Setup on MT4**
- **Pending Orders**: Use Buy Limit or Sell Limit orders within the FVG range.
- **Risk Management**: Each trade should have a stop-loss just outside the FVG to limit potential losses.
#### **Example**
1. **Bullish FVG**:
- Gap identified between 1.0000 and 1.0020.
- Place Buy Limit orders at 1.0005, 1.0010, and 1.0015.
- Set stop-loss for all orders at 0.9995 (just below the FVG lower boundary).
2. **Bearish FVG**:
- Gap identified between 1.1000 and 1.0980.
- Place Sell Limit orders at 1.0995, 1.0990, and 1.0985.
- Set stop-loss for all orders at 1.1005 (just above the FVG upper boundary).
---
### 4. Using Previous Gaps as Trailing Stops
#### **Concept**
Previous FVGs can be used as trailing stops to lock in profits. As the price moves in your favor, adjust your stop-loss to the boundaries of the last unfilled FVG.
#### **Setup on MT4**
- **Manual Adjustments**: Regularly monitor the chart to move your stop-loss orders to the boundaries of previous FVGs.
- **Trailing Stop Expert Advisor (EA)**: Develop or use a custom EA to automate trailing stop adjustments based on previous FVGs.
#### **Example**
1. **Upward Movement**:
- Entered trades filled. Price moves up to 1.0040.
- An unfilled FVG previously between 1.0020 and 1.0030.
- Move stop-loss to 1.0020 (the lower boundary of the last FVG).
2. **Downward Movement**:
- Entered trades filled. Price drops to 1.0960.
- An unfilled FVG previously between 1.0980 and 1.0970.
- Move stop-loss to 1.0980 (the upper boundary of the last FVG).
### Detailed Example Walkthrough on MT4
#### **Market Scenario**:
- **Instrument**: EUR/USD
- **Timeframe**: 15-minute chart
- **Trend Identification**: 50 EMA above 200 EMA, confirming an uptrend.
- **FVG Detection**: FVG identified between 1.1850 and 1.1880 with a significant volume spike.
#### **Steps**:
1. **Identify FVG**:
- Use your custom MQL4 indicator to highlight the FVG.
- Confirm the FVG with the Volume Profile indicator, showing a low volume node.
2. **Confirm Trade Direction**:
- 50 EMA is above the 200 EMA, with RSI above 50, affirming the bullish trend.
3. **Layer Trades**:
- Place three Buy Limit orders within the gap:
- First at 1.1860
- Second at 1.1870
- Third at 1.1880
- Set the stop-loss for all at 1.1845 (15 pips below the gap).
4. **Initial Stop-Loss and Target**:
- Use a 1:2 risk-to-reward ratio, setting an initial take profit 30 pips above the last entry (around 1.1910).
5. **Using Previous Gaps as Trailing Stops**:
- As price moves up and fills orders, monitor for new gaps using the same identification method.
- If a new upward gap forms between 1.1890 and 1.1900, adjust stop-loss for all trades to 1.1890 immediately after it gets established.
6. **Managing the Trade**:
- Continuously monitor the chart, and manually or via EA, trail your stop to the boundaries of newly formed gaps.
7. **Closing the Trade**:
- Your original take profit hits, or
- Price reverses and hits your trailing stop, locking in profits based on the last gap boundaries.
#### **Final Note**:
This strategy requires diligent monitoring and an understanding of MT4 tools for custom indicators and EA setups. FVGs provide a clear framework for identifying high-probability trading zones, offering a robust method to set entries, manage risks, and maximize potential returns.
By consistently using FVGs for gap identification, trade direction, layered entries, and trailing stops, you can create a dynamic and disciplined intraday trading approach that leverages both market structure and behavioural insights.
Instead of using RSI lets use the crossing of EMA 55 with EMA 13 to act similar to RSI crossing above and below the 50 level.
Certainly! Let's incorporate the EMA 55 and EMA 13 cross to act similarly to the RSI crossing above and below the 50 level. This will help determine the trade direction more dynamically based on the interaction between these two EMAs. Here is an updated detailed approach that includes this modification.
### Comprehensive FVG-Based Intraday Trading Strategy on MT4 Using EMA 55 and EMA 13 Cross
#### Step-by-Step Strategy Outline
1. Identifying Fair Value Gaps (FVGs)
2. Determining Trade Direction with EMA Cross
3. Layering in Trades
4. Using Previous Gaps as Trailing Stops
### 1. Identifying Fair Value Gaps (FVGs)
#### **Concept**
Fair Value Gaps are areas where price moves rapidly due to supply and demand imbalances, resulting in low trading volume at these levels. Identifying these gaps correctly is crucial for this strategy.
#### **Setup on MT4**
- **Custom Indicator**: Develop an MQL4 script to scan for FVGs based on criteria like a minimum percentage move relative to ATR and above-average volume.
- **Volume Profile Indicator**: Use a Volume Profile plugin to highlight areas with low volume nodes, indicating potential FVGs.
#### **Example**
Create an MQL4 script to highlight gaps where the price moved more than 1% of the ATR in a single candlestick, with the corresponding volume spike at least double the average volume of the past 20 periods. The script will visually mark the FVG on the MT4 chart.
---
### 2. Determining Trade Direction with EMA Cross
#### **Concept**
Instead of using RSI, we will use the EMA 55 and EMA 13 crosses to determine the trade direction. When EMA 13 crosses above EMA 55, it indicates a bullish trend and vice versa for a bearish trend.
#### **Setup on MT4**
- **Adding EMAs**: Apply EMA 13 and EMA 55 to your chart.
- **Cross Detection**: Monitor for the crossing of these EMAs to determine the prevailing trend.
#### **Example**
1. **Bullish Cross**:
- EMA 13 crosses above EMA 55.
2. **Bearish Cross**:
- EMA 13 crosses below EMA 55.
---
### 3. Layering in Trades
#### **Concept**
Layering trades within the FVG involves placing multiple entry orders at different price levels within the identified gap. This strategy helps in averaging your entry price and maximizing potential gains.
#### **Setup on MT4**
- **Pending Orders**: Use Buy Limit or Sell Limit orders within the FVG range.
- **Risk Management**: Each trade should have a stop-loss just outside the FVG to limit potential losses.
#### **Example**
1. **Bullish FVG**:
- Gap identified between 1.1850 and 1.1880.
- Place Buy Limit orders at 1.1860, 1.1870, and 1.1880.
- Set stop-loss for all orders at 1.1845 (just below the FVG lower boundary).
2. **Bearish FVG**:
- Gap identified between 1.1000 and 1.0980.
- Place Sell Limit orders at 1.0995, 1.0990, and 1.0985.
- Set stop-loss for all orders at 1.1005 (just above the FVG upper boundary).
---
### 4. Using Previous Gaps as Trailing Stops
#### **Concept**
Previous FVGs can be used as trailing stops to lock in profits. As the price moves in your favor, adjust your stop-loss to the boundaries of the last unfilled FVG.
#### **Setup on MT4**
- **Manual Adjustments**: Regularly monitor the chart to move your stop-loss orders to the boundaries of previous FVGs.
- **Trailing Stop Expert Advisor (EA)**: Develop or use a custom EA to automate trailing stop adjustments based on previous FVGs.
#### **Example**
1. **Upward Movement**:
- Entered trades filled. Price moves up to 1.0040.
- An unfilled FVG previously between 1.0020 and 1.0030.
- Move stop-loss to 1.0020 (the lower boundary of the last FVG).
2. **Downward Movement**:
- Entered trades filled. Price drops to 1.0960.
- An unfilled FVG previously between 1.0980 and 1.0970.
- Move stop-loss to 1.0980 (the upper boundary of the last FVG).
### Detailed Example Walkthrough on MT4
#### **Market Scenario**:
- **Instrument**: EUR/USD
- **Timeframe**: 15-minute chart
- **Trend Identification**: EMA 13 crosses above EMA 55, confirming a bullish trend.
- **FVG Detection**: FVG identified between 1.1850 and 1.1880 with a significant volume spike.
#### **Steps**:
1. **Identify FVG**:
- Use your custom MQL4 indicator to highlight the FVG.
- Confirm the FVG with the Volume Profile indicator, showing a low volume node.
2. **Confirm Trade Direction**:
- EMA 13 crosses above EMA 55, confirming the bullish trend.
3. **Layer Trades**:
- Place three Buy Limit orders within the gap:
- First at 1.1860
- Second at 1.1870
- Third at 1.1880
- Set the stop-loss for all at 1.1845 (15 pips below the gap).
4. **Initial Stop-Loss and Target**:
- Use a 1:2 risk-to-reward ratio, setting an initial take profit 30 pips above the last entry (around 1.1910).
5. **Using Previous Gaps as Trailing Stops**:
- As price moves up and fills orders, monitor for new gaps using the same identification method.
- If a new upward gap forms between 1.1890 and 1.1900, adjust stop-loss for all trades to 1.1890 immediately after it gets established.
6. **Managing the Trade**:
- Continuously monitor the chart and manually or via EA trail your stop to the boundaries of newly formed gaps.
7. **Closing the Trade**:
- Your original take profit hits, or
- Price reverses and hits your trailing stop, locking in profits based on the last gap boundaries.
### Summary
1. **Identification Phase**:
- Use custom MQL4 scripts and Volume Profile to identify FVGs.
2. **Trade Direction**:
- Use EMA 13 and EMA 55 crosses to confirm trade direction.
3. **Entry Strategies**:
- Layer multiple pending orders within FVG zones with tight stop-loss placements.
4. **Exit Strategies**:
- Use previous FVG boundaries as trailing stops to secure profits.
By consistently applying this approach and leveraging FVGs for gap identification, incorporating EMA crosses for direction, and using layered entries along with previous gap boundaries as trailing stops, you can craft a thorough and effective intraday trading strategy on MT4. This method melds technical precision with strategic execution, enhancing your overall trading performance.
As you can see I am only lightly touching on the subject but we can see where this is going. A bit more research and we should have something solid to work on later in the week. Just remember, no matter how powerful an AI is, garbage in... garbage out.
XARD777
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XARD: If Carlsberg made charts... Probably the best charts in the world
(i7-14700K, 64 Go, RTX 4080)
