Higher Timeframe Fair Value Gap + Lower Timeframe Entry

Entry Logic

• Entry trigger: 1-minute chart shows a reversal pattern inside a higher timeframe fair value gap.
• Confirmation: The higher timeframe (e.g., 1-hour) shows a clear fair value gap.
• Timeframe: 1-hour for fair value gap, 1-minute for entry.
• Location: Entry taken within the 1-hour fair value gap.
• Market condition: Price is retracing to fill an imbalance.

Exit Logic

• Profit target: The other side of the fair value gap.
• Scaling out: Not used in this strategy.
• Trailing stop: Trail stop below the 1-minute 20 EMA.
• Signal failure: Exit if the fair value gap is completely filled.
• Opposite signal: Exit on a strong reversal on the 1-minute chart.
• Time expiration: Exit if the trade is not profitable within 30 minutes.
• Momentum loss: Exit if volume dries up on the 1-minute chart.

Stop Loss Structure

• Hard stop: Above or below the fair value gap.
• Soft stop: A close beyond the fair value gap.
• Max dollar loss: $75 per trade.
• Max percent loss: 0.5% of account.
• Structural stop: Above or below the 1-minute reversal pattern.

Risk Management Framework

• Risk per trade: 0.5% of account.
• Daily limit: 4 losing trades.
• Weekly limit: 4% drawdown.
• Max drawdown: 12%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Fixed fractional, 0.5% of account per trade.
• Volatility adjustment: Adjust size based on the size of the fair value gap.
• Conviction sizing: Not used in this strategy.
• Scaling in: Not used in this strategy.
• Scaling out: Not used in this strategy.

Trade Filtering

• Market conditions: Avoid trading in low-volatility environments.
• Setups: Only take trades at clear higher timeframe fair value gaps.
• Instruments: Forex pairs and stock indices.
• Time restrictions: Any time of day.
• Chop/news avoidance: Be aware of news events that could invalidate the setup.

Context Framework

• Trend direction: The higher timeframe trend should be considered.
• VWAP relationship: Not a primary factor.
• MA relationship: Not a primary factor.
• Range location: Entry is within a price imbalance.
• Higher TF alignment: The 4-hour chart should be aligned with the 1-hour chart.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.
• Scale out: Not used in this strategy.
• Add size: Not used in this strategy.
• Fast vs slow moves: Take profits quickly.

Time Rules

• Optimal window: Any time of day.
• Times to avoid: Low-volume periods.
• Session notes: Fair value gaps can be filled at any time.

Setup Classification

• A+ setup: Large, clear fair value gap, strong reaction on the 1-minute chart.
• A setup: Fair value gap is smaller, but still shows a reaction.
• B setup: Fair value gap is messy and not well-defined.
• C setup: No clear fair value gap.

Market Selection Criteria

• Instruments: EUR/USD, GBP/USD, SPX, NDX.
• Volume: High liquidity.
• Volatility: Moderate to high volatility.

Statistical Edge Metrics

• Win rate: 60%.
• Avg win: 2R.
• Avg loss: 1R.
• Profit factor: 1.2.
• Expectancy: 0.2R per trade.

Failure Conditions

• Strategy fails when the fair value gap is completely filled.
• Avoid taking trades at small, insignificant fair value gaps.

Psychological Rules

• Patience is required to wait for price to retrace to the fair value gap.
• Quick execution is needed to enter on the 1-minute chart.

Advanced Components

• Regime detection: Use the 4-hour chart to identify the market regime.
• Filters: Avoid taking trades if the fair value gap is very large.
• Correlation: Check for correlation with other major pairs or indices.
• MTF alignment: 4-hour and 1-hour charts should be aligned.

Location

• Strongest: At large, clear fair value gaps.
• Weakest: At small, messy fair value gaps.