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Fair Value Gap indicator MT4 

 October 22, 2022

By  Advanced Strategies

The Fair Value Gap indicator MT4 is a powerful trading tool that can be used to find potential trade opportunities in the forex market. The indicator measures the difference between the current price of a currency pair and its “fair value”, which is determined by the average price of the pair over a certain period of time.

When the difference between the current price and fair value is large, it indicates that the pair may be ripe for a trade. For example, if the current price of EUR/USD is 1.0500 and the fair value is 1.0450, there is a 50 pip opportunity for a long trade. The Fair Value Gap indicator can be used on any timeframe from 5 minutes up to daily, but it works best on longer timeframes such as 1 hour or 4 hours. It can also be used on any currency pair.

What is the Fair Value Gap Indicator MT4?

The Fair Value Gap indicator MT4 is a technical analysis tool that measures the fair value of a security relative to its current market price. It is based on the principle that a security’s price will eventually revert back to its intrinsic value, and that this process happens more quickly when there is a large gap between the two.

The Fair Value Gap indicator can be used to identify opportunities in both bull and bear markets. In a bull market, it can be used to find securities that are undervalued by the market and are therefore ripe for appreciation. In a bear market, it can be used to find securities that are overvalued by the market and are therefore ripe for selling.

This indicator is best used in conjunction with other technical indicators and fundamental analysis in order to confirm signals.

How to Use the Fair Value Gap Indicator MT4?

Assuming you have the Fair Value Gap Indicator MT4 downloaded and installed on your trading platform, here’s how to use it:

The indicator consists of a histogram that fluctuates above and below a zero line. The distance of the histogram bars from the zero line indicates the strength of the underlying currency. If the histogram is above the zero line, it means the currency is currently undervalued (a good time to buy). If the histogram is below the zero line, it means the currency is currently overvalued (a good time to sell).

You can use this indicator alone or in combination with other indicators/strategies to make decisions about when to enter and exit trades. For example, if you see that the Fair Value Gap Indicator is showing that a currency is undervalued and you combine that with a bullish candlestick pattern, you might decide to enter a long trade.

Pros and Cons of the Fair Value Gap Indicator MT4

When it comes to technical analysis, there are a few indicators that get a lot of attention. The Fair Value Gap Indicator MT4 is one of them. This indicator measures the relationship between the current price and the average price over a certain period of time. When the current price is above the average price, it signals that the market is bullish and vice versa.

The main advantage of this indicator is that it can be used in any market and on any time frame. This makes it very versatile. Another advantage is that it gives clear buy and sell signals. The main disadvantage of this indicator is that it is lagging, which means that it will not tell you what the market is going to do, but rather what it has done.

How to trade using the Fair Value Gap Indicator MT4

Fair Value Gap Indicator MT4: Long Example
Fair Value Gap Indicator MT4: Long Example

 

The first step is to identify the direction of the overall trend. You can do this by looking at a longer-term chart, such as a 4-hour or daily chart.

Once you have determined the direction of the overall trend, you can then look for instances where the market has moved away from the fair value price levels. These instances are identified on the charts as red or green arrows.

When you see a red arrow, it means that the market is currently trading below its fair value price level. This indicates that there is potential for the market to move higher and that you should consider buying.

Fair Value Gap Indicator MT4: Short Example
Fair Value Gap Indicator MT4: Short Example

Conversely, when you see a green arrow, it means that the market is currently trading above its fair value price level. This indicates that there is potential for the market to move lower and that you should consider selling.

You can enter into trades either at the current market price or place a pending order at a specific price level. If using a pending order, it is recommended that you place your stop loss just below (for buy orders) or above (for sell orders) the nearest support or resistance level.

Fair Value Gap Indicator MT4: Conclusion

After reviewing the Fair Value Gap Indicator MT4, it is clear that this is a powerful tool that can be used to trade the markets. The indicator provides traders with an easy way to identify market conditions and potential trading opportunities. The indicator is also easy to use and interpret, which makes it an ideal choice for beginner and experienced traders alike.

Fair Value Gap Indicator MT4 Download Link

 


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