Imbalance – imbalance gap
After reviewing the terms Break of Structure (BoS) and Change of Character (ChoCH) in previous articles, we now arrive at another concept that is equally important and considered one of the precise tools used by SMC traders to identify strong and reasonable entry areas: the term Imbalance.
🔸 What is Imbalance?
When prices move very quickly in one direction without returning to the area they passed through, this generates what is known as an imbalance gap between supply and demand.
In simpler terms: there is an area on the chart where balance in trading has not been achieved — the price passed quickly without encountering a similar volume of opposing orders.
These areas are considered incomplete trades, and the price often returns to them later to 'fill' this gap and achieve balance.
🔸 How does Imbalance appear on the chart?
It can usually be identified in Japanese candles, where you see:
Three consecutive candles in one direction (up or down).
The distance between the opening of the first candle and the closing of the third contains a large part that no opposing candle has touched.
This gap is the Imbalance.
🔸 Why is Imbalance important?
Because it represents strong attraction areas for the price.
Financial institutions often intentionally leave these gaps during their strong movements, but they later return to close positions or accumulate new orders. Therefore, these areas are used as potential levels for price retracement or trend continuation.
For the smart trader, the presence of Imbalance near an Order Block or after ChoCH enhances the significance of the area and makes it a candidate for entering a high-accuracy trade.
🔸 How do we deal with Imbalance in trading?
We wait for the price to return to the area.
We observe the presence of additional signals (such as the appearance of an Order Block or a new BoS).
We use it as a temporary support or resistance level.
🧠 Summary
Imbalance is simply a gap left by institutions during their movement, and they often return to it.
Understanding this concept helps you in:
Knowing where the price might head.
Identifying entry areas at the best price.
Reading market intentions through its unbalanced movements.
In the next article, we will discuss Order Blocks, which are considered the foundation upon which most smart money decisions are built.
