What is an imbalance/FVG? #
imbalance = Fair Value Gap (FVG)
We talk about order imbalance when a market exchange receives too many orders of one type of order – it can be buy, sell, limit – and not enough from the opposite pole of the order. In order for sellers to complete their trades, they need buyers and vice versa. If the equation is shifted too far in one direction, it causes an imbalance.
Like all the other concepts in this indicator, we use them in combination with other Smart money concepts to increase the probability of our trades.
A market price imbalance occurs when there is a large mismatch between supply and demand, which can lead to resistance or lack of support when an asset is not trading at its fair value.
It is common for prices to re-equilibrate after an imbalance and thus return to the price area where the imbalance originated. PL: The price rose rapidly, there was no price action in one part as only 3 steep green rising candles rose 20% and no support formed lower in the price action. There was no consolidation, small stops etc. Not enough orders filled yet and before further upside the Market Makers would like to fill this. Same situation in reverse, only with resistance and short positions. These imbalance areas can be used as support and resistance areas in the future.
Bearish FVGs are above price and we expect them to be filled before further declines. Bullish FVGs are below price and could be loaded before further rises. These areas can be good monitoring points in combination with additional key levels for placing limit orders, dca to a position.