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4. FVG and areas of interest
Operational definition
In the educational three-candle model, a bullish FVG forms when the third closed candle's low is above the first candle's high. The zone lies between those levels. For a bearish FVG, the third high is below the first low. The second candle lies between them in time.
This is a price pattern on the selected timeframe. It does not prove there were no trades between those prices: the second candle may have crossed that range. The name Fair Value Gap does not establish objectively fair value.
If the rule uses closed candles, the FVG is known only after the third candle closes. Earlier entry studies an unfinished structure that may disappear. Specify minimum zone size and the handling of partial overlap in advance.
Limit and confirmed entry
A limit approach places an order in a chosen part of the zone in advance. It may offer a shorter stop distance, but can enter without confirmation and face a continuing move against the position. Record unfilled orders separately from trades in the statistics.
A confirmed approach waits for a specified event after the return: for example, a close above the bullish zone's upper boundary. Entry becomes known later and may worsen the target-to-risk ratio. Compare approaches using the same cost calculation method.
Zone lifetime, full filling, a close beyond the far boundary and a maximum number of repeat touches are possible invalidation conditions. Do not change them during an individual example. "The zone still works" must have a numerical or event-based definition.
Example and risk control
The first candle's high is 100 and the third candle's low is 102: bullish zone 100-102. In a practice limit setup, E = 101, S = 99, T = 105. With R = 6, quantity q = 3 and potential gross profit 12, or 2R. If the order does not fill, the outcome is no trade, not profit from the subsequent move.
Confirmation only appears when the available price is 103. With the same S and T, risk distance is 4 and potential reward is 2: reward/risk = 0.5. Greater confidence in the picture does not remove the deterioration in arithmetic.
This module does not claim that FVG is an active standalone strategy in the current Radar version. Check support for a specific model in the live interface and documentation. Historical development plans are not published functionality.
Exercise. Find five completed structures and record when each first became known. Choose entry, lifetime and invalidation in advance for each. Do not delete a zone from the journal simply because price went through it.