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Absorption

Fair Value Gaps Setup 01 [TradingFinder] FVG Absorption + CHoCH🔵 Introduction 🟣 Market Structures Market structures exhibit a fractal and nested nature, which leads us to classify them into internal (minor) and external (major) categories. Definitions of market structure vary, with different methodologies such as Smart Money and ICT offering distinct interpretations. To identify market structure, the initial step involves examining key highs and lows. An uptrend is characterized by successive highs and lows that are higher than their predecessors. Conversely, a downtrend is marked by successive lows and highs that are lower than their previous counterparts. 🟣 Market Trends and Movements Market trends consist of two primary types of movements : Impulsive Movements : These movements align with the main trend and are characterized by high strength and momentum. Corrective Movements : These movements counter the main trend and are marked by lower strength and momentum. 🟣 Break of Structure (BOS) In a downtrend, a Break of Structure (BOS) occurs when the price falls below the previous low and establishes a new low (LL). In an uptrend, a BOS, also known as a Market Structure Break (MSB), happens when the price rises above the last high. To confirm a trend, at least one BOS is necessary, which requires the price to close at least one candle beyond the previous high or low. 🟣 Change of Character (CHOCH) Change of Character (CHOCH) is a crucial concept in market structure analysis, indicating a shift in trend. A trend concludes with a CHOCH, also referred to as a Market Structure Shift (MSS). For example, in a downtrend, the price continues to drop with BOS, showcasing the trend's strength. However, when the price rises and exceeds the last high, a CHOCH occurs, signaling a potential transition from a downtrend to an uptrend. It is essential to note that a CHOCH does not immediately indicate a buy trade. Instead, it is prudent to wait for a BOS in the upward direction to confirm the uptrend. Unlike BOS, a CHOCH confirmation does not require a candle to close; merely breaking the previous high or low with the candle's wick is sufficient. 🟣 Spike | Inefficiency | Imbalance All these terms mean fast price movement in the shortest possible time. 🟣 Fair Value Gap (FVG) To pinpoint the "Fair Value Gap" (FVG) on a chart, a detailed candle-by-candle analysis is necessary. This process involves focusing on candles with substantial bodies and evaluating them in relation to the candles immediately before and after them. Here are the steps : Identify the Central Candle : Look for a candle with a large body. Examine Adjacent Candles : The candles before and after this central candle should have long shadows, and their bodies must not overlap with the body of the central candle. Determine the FVG Range : The distance between the shadows of the first and third candles defines the FVG range. This method helps in accurately identifying the Fair Value Gap, which is crucial for understanding market inefficiencies and potential price movements. 🟣 Setup This setup is based on Market Structure and FVG. After a change of character and the formation of FVG in the last lag of the price movement, we are looking for trading positions in the price pullback. Bullish Setup : Bearish Setup : 🔵 How to Use After forming the setup, you can enter the trade using a pending order or after receiving confirmation. To increase the probability of success, you can adjust the pivot period market structure settings or modify the market movement coefficient in the formation leg of the FVG. Bullish Setup : Bearish Setup : 🔵 Setting Pivot Period of Market Structure Detector : This parameter allows you to configure the zigzag period based on pivots. Adjusting this helps in accurately detecting order blocks. Show major Bullish ChoCh Lines : You can toggle the visibility of the Demand Main Zone and "ChoCh" Origin, and customize their color as needed. Show major Bearish ChoCh Lines : Similar to the Demand Main Zone, you can control the visibility and color of the Supply Main Zone and "ChoCh" Origin. FVG Detector Multiplier Factor : This feature lets you adjust the size of the moves forming the Fair Value Gaps (FVGs) using the Average True Range (ATR). The default value is 1, suitable for identifying most setups. Adjust this value based on the specific symbol and market for optimal results. FVG Validity Period : This parameter defines the validity period of an FVG in terms of the number of candles. By default, an FVG remains valid for up to 15 candles, but you can adjust this period as needed. Mitigation Level FVG : This setting establishes the basic level of an FVG. When the price reaches this level, the FVG is considered mitigated. Level in Low-Risk Zone : This feature aims to reduce risk by dividing the FVG into two equal areas: "Premium" (upper area) and "Discount" (lower area). For lower risk, ensure that "Demand FVG" is in the "Discount" area and "Supply FVG" in the "Premium" area. This feature is off by default. Show or Hide : Given the potential abundance of setups, displaying all on the chart can be overwhelming. By default, only the last setup is shown, but you can enable the option to view all setups. Alert Settings : On / Off : Toggle alerts on or off. Message Frequency : Determine how often alerts are triggered. Options include : "All" (alerts every time the function is called) "Once Per Bar" (alerts only on the first call within the bar) "Once Per Bar Close" (alerts only at the last script execution of the real-time bar upon closing) The default setting is "Once Per Bar". Show Alert Time by Time Zone : Set the alert time based on your preferred time zone, such as "UTC-4" for New York time. The default is "UTC". Display More Info : Optionally show additional details like the price range of the order blocks and the date, hour, and minute in the alert message. Set this to "Off" if you prefer not to receive this information.
Pine Script® indicator
by TFlab
9
OrderFlow Absorption IndicatorWhat it Does The OrderFlow Absorption Indicator marks areas where the price absorbs a large volume of aggressive market trades. This indicates areas where price may bounce back due to large limit (resting) orders absorbing significant aggressor volume (market orders). Absorption can also be seen as "preventing" or "stopping" the other side from breaking through a price level (e.g. bids stopping an influx of sell market orders). Absorption may signal a change in sentiment, potentially leading to a pullback or reversal. An Example of Absorption Of course, it is not always the case that such bullish absorption will initiate a trend as the example above. The OrderFlow Absorption Indicator merely serves as a tool for spotting possible absorption points in the market which you can incorporate into your trading arsenal. How it Works The indicator actively monitors price changes and records volume accumulated at a price level. If the price bounces back to at least where it was before the current price move, the indicator records this as absorption, provided it meets the Volume Requirement and optional Time Requirement. How to Use it 1. Set Parameters Choose your desired tick size and volume filter value. If unsure, refer to the table on the top right of the chart for recommended values. An automatic volume limit filter mode is also available. Automatic Limit Mode : Enable this mode to have the indicator automatically select a volume filter value. It calculates the standard deviation of the last n minutes of volume and multiplies it by a volume multiplier. You can adjust these parameters. Higher Volume Filter : Setting a higher volume filter value results in fewer, but higher quality detections, reducing noise. 2. Enabling the Time Limit Enabling the time limit further improves detection quality by filtering out price levels that can defend against quick, sudden aggressive orders, acting as confirmation and indicating strong sentiment and resilient liquidity. 3. Enabling Historical Data Absorption The indicator can also detect absorption in historical data, though less accurately than in real-time due to OHLCV aggregation. You can select the granularity of historical data. Lower granularity (e.g., 1 second) : Provides more accurate detections but may slow down the indicator. Higher granularity : Improves speed but reduces detection accuracy. Other Features Hovering : When hovering over an absorption point, the interface reveals the price where the absorption occurred, along with the volume absorbed by the bids and asks, as well as the volume filter value used. Delta Mode : In Delta mode, the system calculates the difference between the volume absorbed by bids and asks, revealing points only when the absolute value of this difference exceeds the volume filter value. Especially useful for larger tick sizes. Troubleshooting If the indicator doesn't mark anything, it means the traded volume hasn't exceeded the set volume filter value within the specified price intervals(tick size) and time limit. Adjust these settings as necessary.
Pine Script® indicator
by nico-von
9
Fair Value Gap Absorption Indicator [LuxAlgo]The Fair Value Gap Absorption Indicator aims to detect fair value gap imbalances and tracks the mitigation status of the detected fair value gap by highlighting the mitigation level till a new fair value gap is detected. The Fair Value Gap (FVG) is a widely utilized tool among price action traders to detect market inefficiencies or imbalances. These imbalances arise when buying or selling pressure is significant, resulting in a large upward or downward move, leaving behind an imbalance in the market. 🔶 USAGE A fair value gap appears in a triple-candle pattern when there is a large candle whose previous candle’s high and subsequent candle’s low do not fully overlap the large candle. The space between these wicks is known as the fair value gap. Price can come back to these imbalance areas and mitigate them, however, this is sometimes a process involving multiple bars, the displayed imbalances by the indicator allow tracking the current mitigation level of a displayed imbalance. Fair value gaps can become a magnet for the price before continuing in the same direction. Traders commonly wait for the price to revert toward the fair value gap to clear out the imbalance before continuing to move toward the prevailing trend. 🔶 SETTINGS 🔹Fair Value Gaps Fair Value Gap Width Filter: defines the filtering multiplier, please refer to the tooltip of the input option for further details. Bullish, Imbalance and Mitigation: color customization option. Bearish, Imbalance and Mitigation: color customization option. Display Percentage of Mitigation: Display the percentage of the mitigation areas. Historical Fair Value Gaps: toggles the visibility of the historical fair value gaps. 🔶 LIMITATIONS Please note that filtering cannot be applied for the first 144 (atr fixed-length) candles since the atr value won't be present that is used for filtering. 🔶 RELATED SCRIPTS Fair-Value-Gap HTF-Fair-Value-Gap Liquidity-Voids-FVG
Pine Script® indicator
by LuxAlgo
17
Gap Absorption StrategyLike the nature, markets don't like the void, and this is something we can take advantage of by trading gaps on some markets. This technique is well known, so I wanted to write a tiny script based on this strategy to get a bit more comfortable with it. IMPORTANT: Default parameters wont give you good trades on every markets, you need to modify these parameters to see which proportions correspond to the stock you're trading. This script triggers signals on predefined variation of a stock price after a gap, and allows its user to configure TP and SL prices corresponding to a specific percentage of this gap movement. Note: We can observe that opening gaps are often the most interesting. Options Trigger: the price variation you want to trigger on (in % of the price) Stop Loss : in % of the gap Take profit : in % of the gap A small table is displayed in the top right corner of the chart to give you TP/SL/Signal prices for each opportunity SL (red line) and TP (green line) are also displayed on the chart when a signal is triggered Information concerning the current opportunity is given at the bottom of the chart Note: This script is based on the Gap-Size-Indicator that I published a few weeks ago.
Pine Script® strategy
by noop-noop
4