Fair value gaps and liquidity voids are both indicators of sell-side and buy-side imbalance in trading. The only difference is how they are represented in the trading chart. Liquidity voids occur when the price moves sharply in one direction forming long-range candles that have little trading activity, whilst a fair value is a gap in price.
Liquidity can help you to determine where the price is likely to head next. In conjunction with higher timeframe market structure, and supply and demand, liquidity can give you insights into potential price movement. It's essential to practice using liquidity alongside trend analysis and supply and demand to read market conditions effectively.
The peculiar thing about liquidity voids is that they almost always fill up. And by “filling”, we mean the price returns to the origin of the gap. The reason for this is that during the gap, an imbalance is created in the asset that has to be made up for. The erasure of this gap is what we call the filling of the void. And while some voids waste no time in filling, some others take multiple periods before they get filled.
The script takes into account user-defined parameters and detects the liquidity voids based on them, where detailed usage for each user-defined input parameter in indicator settings is provided with the related input's tooltip.
🔹 Liquidity Detection
- Liquidity Voids Threshold: Act as a filter while detecting the Liquidity Voids. When set to 0 basically means no filtering is applied, increasing the value causes the script to check the width of the void compared to a fixed-length ATR value
- Bullish: Color customization option for Bullish Liquidity Voids
- Bearish: Color customization option for Bearish Liquidity Voids
- Labels: Toggles the visibility of the Liquidity Void label
- Filled Liquidity Voids: Toggles the visibility of the Filled Liquidity Voids
🔹 Display Options
- Mode: Controls the lookback length of detection and visualization
- # Bars: Lookback length customization, in case Mode is set to Present
🔶 RELATED SCRIPTS
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All scripts & content provided by LuxAlgo are for informational & educational purposes only. Past performance does not guarantee future results.
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