Order Blocks VS Fair Value Gaps
Order Blocks VS Fair Value Gaps ( Smart Money Debate )
Video: Order Blocks VS Fair Value Gaps ( Smart Money Debate )
Intro
We’re going to see whether Order Blocks or Fair Value Gaps are better. We are going to test high probability setups for 3 months and see what the results are.
Order Block Case Study
what this is about: High quality Order Blocks are explained and its backtest result is given.
High quality OB
We’re going to test high quality Order Blocks. Look for Order Blocks on high timeframes. High quality order blocks are the order blocks which:
solely responsible for breaking out of a shelf/range
causes a strong bull/bear move
are extreme order blocks (that means that the order block overlaps with the Premium/Discount zone). For a buy, a demand OB should be in the Discount zone. For a sell, a supply OB should be in the Premium zone.
https://www.tradingview.com/x/WmhbHBmJ/
In this example, we see a high-quality Demand Order Block.
Here’s why:
It caused a move out of the shelf and that was a strong up move
It overlapped with the Discount zone
In this example, we see a high-quality Supply Order Block. Here’s why:
It caused a move out of the shelf and that was a strong down move
It overlapped with the Premium zone
https://www.tradingview.com/x/ftbCMjj7/
Results
Here are the back test results of Order Blocks in 3 months (The timeframe is dynamic and will be a rough estimation):
OB Results
Total trades Winning trades RR Macro TF Micro TF
6 3 9 hrs 30 mins
Fair Value Gap Case Study
what this is about: High quality FVGs are explained and its backtest result is given.
High quality FVG
We’re going to test high quality FVGs. High quality FVGs are the FVGs which:
come after a compression or stop hunt
are on lower timeframes (compared to when Order Blocks are used)
An FVG is invalid if it comes before price breaks out of a compression. A compression is a complete mitigation of extremes.
https://www.tradingview.com/x/4RnptUhz/
This is an example of a compression:
Price kept mitigating the demand zones until it breaks out of the compression.
After price breaks out of the compression, an FVG forms.
This is another example of a compression:
We see that price formed a compression. Then, it broke out of the compression to form an FVG. Since the FVG came after the break of the compression, it is valid.
Results
Here are the back test results of FVGs in 3 months (The timeframe is dynamic and will be a rough estimation):
FVG Results
Total trades Winning trades RR Macro TF Micro TF
5 2.3 6 hrs 30 mins
OB + FVG
what this is about: Order Blocks and FVGs are used together for setups and its backtest result is given.
Strategy explanation
The setups are when an overlap of the OB and FVG happen. When there is a micro Order Block inside of a higher timeframe FVG.
Buy example:
This bullish FVG was on the 4H timeframe.
When we go down to the 15 min timeframe, we see that we had a demand order block which overlapped with the FVG.
Sell example:
This bearish FVG was on the 4H timeframe.
When we go down to the 15 min timeframe, we see that we had an order block which overlapped with the FVG.
Results
Here are the back test results of OB + FVGs in 3 months (The timeframe is dynamic and will be a rough estimation):
OB + FVG Results
Total trades Winning trades RR Macro TF Micro TF
4 2 5.6 - -
Conclusion
Overall Results
Strategy Total Trades Winning trades RR
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