Enhancing Robot Trading Performance with Smart Money Concepts Using Fair Value Gaps and Premium Discount Zones

Abstract

The objective of this research is to develop a trading system that uses the trading behavior of major investors to identify trends and time entries more accurately. The system focuses on price gaps to increase opportunities for more precise buy -sell entries and seeks to determine fair value by trading in areas above the equilibrium point. The research has developed a trading algorithm based on Smart Money Concept (SMC) using the Meta Trader 5 platform in expert advisor format. The algorithm is optimized using Fair Value Gaps (FVG) and the determination of appropriate pricing through Premium Discount Zone (PDZ). The research results, based on 1 year of historical data on a 4-hour timeframe for trading XAUUSD and using U.S. dollars as the currency unit, were evaluated based on: Open Position (Position), Missed Trading Opportunities (%), Win Rate (%), Average Risk-Reward Ratio (RRR), Profit Growth (%), Consecutive Losses (Position), Maximum Drawdown (%). The findings are as follows 1) SMC (34 Position, 47.06%, 16.67%, 4.23 RRR, -2.30%, 8 Position and 5.10%) 2) SMC and FVG (110 Position, 47.27%, 24.14%, 2.69 RRR, -6.40%, 13 Position and 5.90%) and 3) SMC, FVG and PDZ (23 Position, 43.48% , 30.77% , 4.98 RRR, 10.90%, 5 Position and 0.00%). So that using price gaps to enhance entry points gives investors more opportunities, but without considering fair value, the strength of entry points remains weak. Incorporating fair value assessments improves the overall strength of buy-sell entries, leading to better trading performance.