FVG Expiry and Minimum Size: Parameters That Make Gap Studies Testable

[FXS Prop Desk]

A fair value gap is a three-candle pattern where candle 1's wick and candle 3's wick do not overlap. Two parameters decide whether an FVG study produces anything useful: minimum size and expiry.

Minimum size: on M1–M5, tiny gaps of a fraction of a pip appear constantly. Requiring a gap of at least 0.3–0.5 × ATR removes most of the noise.

Expiry: a gap from three hours ago may no longer mean anything to the market. Setting a validity window (e.g. 20 bars) and voiding gaps after it keeps the sample honest.

Other choices to fix:

• Entry at the near edge, the midpoint, or full fill.
• Whether the gap must follow a structure break.
• What counts as a filled gap (touch vs close through).

Running the same test with different expiries often shows a clear pattern: fresh gaps behave differently from old ones. That is more useful than any single backtest result.

What minimum size and expiry do you use for FVGs?

[Fairman]

What counts as a filled gap (touch vs close through).

This one quietly changes results more than size or expiry. If a touch counts as filled, a lot of gaps get marked done on a single wick that never really traded into them, and the stats for later entries end up looking worse than they are. If you require a close through, you're mostly measuring gaps that already failed. One way round it is to log the depth of the first revisit as a percentage of the gap, so 0, 25, 50, 100 and beyond. Then you can pick the definition after looking at the distribution rather than before. On the ATR filter, worth checking whether you use the ATR at the time of the gap or a session average, because around the London open those two can be quite far apart.