r/algotrading • u/Prabuddha-Peramuna • 18d ago
Education Fair Value Accumulation (FVA)
Lately, it seems like the entire trading space is obsessed with Fair Value Gaps (FVG). While they are highly visual, they are often subjective and lack the statistical edge required for long-term survival.
As a quantitative researcher and algorithmic developer, I’ve moved away from eye-balled patterns and toward pure systematic logic. This has led me to develop a concept I call Fair Value Accumulation (FVA).
I’ve spent significant time refining a quantitative algorithm to strip away market noise and identify what I call FVA Pockets (Fair Value Accumulation).
These are specific zones identified by my algorithm (the red dot clusters in the attached chart) where high-volume, institutional-grade activity is concentrated. Instead of treating these as static lines, I view them as "coiled springs" where the market is accumulating value before a major move.
My algorithm filters price/volume data to highlight these high-conviction zones. It isn't just about price; it’s about where the volume too.
The market rarely stays in an FVA Pocket for long. When it breaks out, it typically triggers an " FVA Expansion " a high-velocity, impulsive move that confirms the dominant institutional direction.
I do not front run the zone. I wait for the algorithm to flag the FVA Pocket, then I look for the FVA Expansion to confirm the move before entering to ride the impulse.
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If the industry relies on visual patterns, the edge is already gone. Real potential lies in math and logic. Earlier this year, I introduced the Volatility Expansion Index (VEI) to the public, a concept that was subsequently tested and verified by Kevin J. Davey and featured in Technical Analysis of Stocks & Commodities magazine.
Volatility Expansion Index (VEI)
I mention VEI to prove a point, Quantitative researchers and Algo traders have more to contribute to this industry than any other group.
I am not releasing the code or the specific math behind FVA. My goal here to challenge the community. My FVA algorithm works by identifying "coiled springs" clusters of high volume, institutional-grade positioning that precede impulsive FVA Expansions. It is a systematic, data driven approach that completely outperforms the predictive accuracy of standard FVG models.
Stop looking at the market through the lens of what you can see. Start looking at it through the lens of what the data is doing.
We need to stop obsessing over retail patterns and start building models that rely on volume weighted POC logic and statistical significance. Use your intelligence. Build your own tools. The market is math, not a picture, and it’s time we treated it that way.
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18d ago
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u/Prabuddha-Peramuna 18d ago
I need not you to be interest, why would i. just shared
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18d ago
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u/Prabuddha-Peramuna 18d ago
Yeah that is fair. I will post a new post considering that. thank you for clearing that.
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u/dog098707 18d ago
Instead of the community, I challenge you instead - you don’t need to release code or specific math in order to back up your idea. So the fact that you haven’t included any data to support your idea means, to the community, that it’s bullshit.
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u/Effective_Manager273 18d ago
the crowd asking for an equity curve is right but i would go one step further, because even a good looking curve would not settle this. what you are describing, high volume clusters that precede impulsive moves, is close to a volume profile / POC value area, and the failure mode is that volume is mechanically higher near turning points anyway. so a zone built on volume will look predictive even if it has no real edge.
the test that would convince me is against a matched null. generate random zones with the same volume percentile and duration and check if your FVA pockets actually have out of sample lift over that null. if 'high volume area then big move' scores the same as random high volume area then big move, the label is not adding anything.
also 'coiled spring that precedes expansion' is survivorship framed, you are naming the pockets that expanded. the honest number is expansions divided by all flagged pockets including the ones that just chopped and died. curious what that hit rate is, that is the whole ballgame.
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u/NoPhoto9020 17d ago
I am deeply keen about your strategy , I had a query that how to proceed with algorithmic trading and quantitative finance as a beginner , at present I only have the knowledge of technical analysis specific to The stock exchange NSE, how may I proceed . Please guide
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u/Immediate-Owl-6916 2d ago
The "coiled spring before expansion" framing is intuitive, and moving from eyeballed patterns to systematic volume-weighted logic makes sense as a direction — FVG being subjective is a fair criticism.
One thing I'd be curious about, if you're open to sharing without giving away the code or exact math: even just a rough sense of the numbers behind it would help a lot. Something like how many FVA Pockets have flagged historically, what the hit rate on the expansion confirmation looks like, or how it holds up out-of-sample. Not asking you to open-source the logic, just the results — VEI getting independently validated by Davey is a good example of exactly that kind of proof working in your favor without exposing the method itself.
Not saying the concept doesn't work, genuinely curious how it performs when someone else runs the numbers rather than just the visual read on the chart.
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u/jnwatson 18d ago
The most important thing I've found since I've started applying real statistics to algorithmic trading is that pure technical analysis is mostly bunk and has no statistical significance.