Fair Value Gap Oscillator
The Fair Value Gap Oscillator is an exceptional smart money concept tool that measures oscillations of the market’s fair value gaps. It is a leading momentum indicator used to identify the assets’ mispricings over time. By understanding how fair value gaps impact the price over time, traders get a good understanding of the current market structure. The Fair Value Gap Oscillator is a powerful tool for identifying market trends.
What is FVG
A fair value gap or FVG has several names that are used interchangeably, such as liquidity void, order imbalance, or insufficient price action.
Fair Value Gap, Liquidity voids are sudden price changes without enough liquidity at a stable price, and the price jumps from the originating price level to the final price level, creating an imbalance in price. The reason the price moves rapidly is because of inefficiency. If the price gaps upward, buyers do not get a fair value; likewise, if the price gaps downward, sellers do not get a fair value.
The entire premise of the fair value gap is that the gaps will get filled eventually. FVG can be used as potential targets as well as potential areas of entry.
How to use the indicator
It is a momentum indicator that helps traders identify mispricings in the market over time. In addition, the FVG Oscialltor can be used to identify overbought and oversold conditions in the market, as well as trends and leading trend changes.
The Fair Value Gap Oscillator can also be used to identify trends in the market. By tracking the FVG over time, investors can identify whether the market is trending up or down.
This indicator can be used to identify leading changes in the market’s momentum and price action. It will indicate beforehand when the momentum decreases and a potential trend change is about to come.
Leading Indicators are great for identifying divergences. This Fair Value Gap Oscillator is a powerful yet simple tool to spot divergences in the market.
It is important to remember that the Fair Value Gap Oscillator is just one tool in your investment toolbox. It should be used in conjunction with other smart money concept indicators to identify excellent trading opportunities.
Fair Value Gap Oscillator features
A Trend FVG feature is added to help Trend Traders get a long-term overview of the FVG trend. This feature can be used for the leading FVG calculation to get a predictive FVG trend.
Leading FVG Calculation
The leading calculation makes the Fair Value Gap oscillator sensitive to fair value changes and becomes more leading.
The Trend line feature is a combination of the leading and the long-term trend that can be used as trend confirmation.