Fair Value Gaps - JC

FVG Indicator — How It Works

What It Does

Detects Fair Value Gaps (3-bar price imbalances) on any chart timeframe and draws them as semi-transparent boxes that track their full lifecycle from formation to resolution.

Detection

A FVG forms when a 3-candle pattern leaves a price gap:

- Bullish FVG: Bar 3's low > Bar 1's high — price gapped up, leaving an unfilled zone between bar 1's high (bottom) and bar 3's low (top)
- Bearish FVG: Bar 1's low > Bar 3's high — price gapped down, leaving an unfilled zone between bar 3's high (bottom) and bar 1's low (top)

Bar 2 (the middle candle) is where the box starts drawing from, but it's not used in detection — only bars 1 and 3 matter.

State Machine (7 States)

Each FVG tracks through a lifecycle:

Active states:
- Fresh (blue/orange) — Just formed, price hasn't returned to the zone yet
- Tapped (lighter shade) — Price has entered the zone but hasn't resolved it
- Respected (green/red) — Price tapped the zone then bounced away (closed back outside)

Terminal states:
- Consumed — Fill ratio reached 100% (zone fully filled by wicks)
- Invalidated — Price closed through the opposite side of the zone
- Displaced — Price closed through with a strong candle body (>= gap size × displacement multiplier)
- Timeout — Unresolved after 50 bars (configurable)

Visual Behavior

- Active FVGs extend rightward bar-by-bar until they reach a terminal state
- Terminal FVGs are deleted by default (toggle "Show terminated" to keep them visible in gray)
- Optional midpoint dashed line marks the CE (Consequent Encroachment) level — the 50% retracement of the gap
- Oldest FVGs are removed when the count exceeds the max (default 15)

Key Inputs
┌─────────────────────────┬─────────┬────────────────────────────────────────────┐
│ Setting │ Default │ Purpose │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Max FVGs │ 15 │ How many to show on chart │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Min gap ticks │ 0 │ Filter out small gaps (set to 4 for MNQ) │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Timeout bars │ 50 │ When unresolved FVGs expire │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Consumed threshold │ 1.0 │ Fill ratio to mark as consumed │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Displacement multiplier │ 1.0 │ Body size relative to gap for displacement │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Show midpoint │ ON │ CE level dashed line │
├─────────────────────────┼─────────┼────────────────────────────────────────────┤
│ Show terminated │ OFF │ Keep resolved FVGs visible │
└─────────────────────────┴─────────┴────────────────────────────────────────────┘