I tested if "bigger Fair Value Gaps are better" on 60k observations. It's not. But the impulse is.
Retail trader from Italy. Got tired of the SMC/ICT crowd repeating "bigger FVG, better setup" without anyone actually checking it. So I checked.
4 years of M15 data on EURUSD, USDJPY, USDCAD. About 60,000 FVGs detected and analyzed.
Finding 1: gap size alone is essentially a coin flip. The biggest gaps (20 to 50 pips) had negative net edge in my sample.
Finding 2: the impulse (size of the candle creating the gap) is a much cleaner signal. Filtering for impulse ≥ 10 pips survives walk-forward where the baseline busts.
Three configs backtested with FTMO style caps (5% daily, 10% total, $10k, 0.5% risk, costs included):
- Baseline: +78% over 4y, but 1 bust out of 6 walk-forward windows
- Impulse ≥ 10p: +68% over 4y, 0 busts in 6 windows
- Impulse ≥ 20p: +18%, too restrictive
Also did Monte Carlo, statistical significance tests, and a null benchmark with randomized trade directions (random gave 58% bust rate vs 1.1% for the filtered version).
Caveats are in the article: small walk-forward sample, mild data snooping on threshold selection, mixed results across symbols.
Full writeup with charts, methodology, and limitations: Article
Critique welcome.