Imbalance versus a balanced market

Balanced and unbalanced

An imbalance is an inefficiency in the market, left behind by unbalanced price action. It is all body and no wicks. A healthy, balanced market has clean price action: bodies, wicks and pullbacks, with candles whose wicks cross over each other and some kind of equilibrium between buyers and sellers. If it is built fast it will not last; if it is built slowly it will grow.

Why imbalances fill

An imbalance means there was excess demand or excess supply, so much that there was no room for the other side to come into the market. Buyers and sellers did not get an equal opportunity to trade; price was not delivered fairly to both sides. That price has to be filled, so the market gravitates back to these areas to restore a fair balance, and then continues its trend. The best entries come from trading an imbalance together with an institutional candle.

Trading an imbalance

Use Fibonacci to refine the entry inside the imbalance. Scout the lower timeframe of the imbalance for a decisional area. Keep the stop tight, because the mitigation may be filled on the higher timeframe.

The drawbacks are real: not every imbalance gets filled, the market invalidates them often, and they occur constantly, so an imbalance on its own is not a reason to trade.

Watch the fill

Click the candle that left an imbalance on the Trade Desk and step forward: the replay shows whether the market came back to fill it, how far it reached, and where your entry sat against the gap.