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Order Imbalance and Change Point Detection█ Order Imbalance and Change Point Detection Trading might sometimes seem like magic, but at its core, the market operates on simple principles, supply and demand, and the flow of information. Recent academic work shows that retail traders can gain an edge even without expensive data feeds by understanding some fundamental ideas, like order imbalance and change point detection. In this article, we break down key concepts such as order imbalance, sudden volume shifts, change point detection, and the CUSUM algorithm. We also explain how retail traders can apply these ideas to improve their strategies. █ What Is the Order Book and Order Imbalance? ⚪ The Order Book Every market has an order book, simply a list of all buy orders (bids) and sell orders (asks) for an asset. ⚪ Order Imbalance – A Key Indicator Order imbalance measures the difference between the total buying and selling orders for the order book. Definition: Order imbalance is the difference in volume between buy orders and sell orders. Why It Matters: A strong imbalance means one side (buyers or sellers) is dominating. For example, if there are significantly more buy orders than sell orders, the market may be gearing up for a price increase. ⚪ How It’s Detected in Research: Researchers calculate a volume-weighted average price (VWAP) across multiple price levels in the order book (typically the top 20 levels) and compare it to the mid-market price. A positive imbalance indicates aggressive buying, while a negative imbalance suggests selling pressure. █ Sudden Volume Shifts and Change Point Detection ⚪ Sudden Volume Shifts What It Means: Sometimes, there is an abrupt and noticeable change in the number of orders placed. This sudden shift in volume can signal a big move on the horizon. Example: In a trading context, this might be seen when volume bars spike unexpectedly on a price chart, often accompanying rapid price moves or breakouts. ⚪ Why They Are Crucial: Sudden volume increases often coincide with significant order flow events. For instance, if a large number of buy orders hit the market at once, this could indicate a rapid shift in trader sentiment and serve as a precursor to a sustained price move. █ Change Point Detection – Spotting the Shift Definition: Change point detection is a statistical technique used to identify the exact moment when the properties of a data series change significantly. Purpose: In trading, it helps distinguish meaningful shifts in market behavior from random noise. How It’s Used: Researchers apply this to order imbalance data to flag moments when the market’s buying or selling pressure changes abruptly. These flagged moments (or “change points”) can then be used to forecast short-term price movements. █ Meet CUSUM: The Cumulative Sum Algorithm CUSUM stands for Cumulative Sum. It’s a simple yet powerful algorithm that detects changes in a data series over time. ⚪ How CUSUM Works: Tracking Deviations: The algorithm continuously adds up minor differences (or deviations) from an expected value (like a running average). Signal for Change: When the cumulative sum exceeds a predetermined threshold, it signals that a significant change has occurred. In Trading: CUSUM can be applied to measure the order imbalance. When the cumulative deviation is high enough, it indicates a strong change in market pressure, an early warning signal for a potential price move. For example, a rising cumulative sum based on increasing buy-side pressure might indicate that the price will likely move upward. █ How Can Retail Traders Benefit Without Full LOB Data? Full access to the order book (all price levels and orders) can be expensive and is usually reserved for institutional traders. However, retail traders can still gain valuable insights by: ⚪ Using Proxies for Order Imbalance: Many trading platforms offer basic volume indicators. Look for volume spikes or unusual shifts in trading volume as a sign that order imbalance might occur. ⚪ Leveraging Simplified Change Detection: Even if you don’t have complex LOB data, you can set up simple alerts on your trading platform. For instance, you might create a custom indicator that watches for rapid increases in volume or price moves, similar to a basic version of the CUSUM algorithm. ⚪ Focusing on Key Price Levels: Even with limited data, monitor support and resistance levels. A sudden break (accompanied by high volume) can serve as a proxy for a change in market dynamics. ⚪ Adopting a Data-Driven Mindset: Integrate these concepts into your routine analysis. When you see a significant volume shift or a sudden spike in activity, consider it a potential “change point” and adjust your strategy accordingly. █ In Summary Order Imbalance measures the difference between buying and selling volumes in the order book, offering insights into market direction. Sudden Volume Shifts are significant changes in trading volume that can signal a shift in market sentiment. Change Point Detection helps identify the precise moments when these shifts occur, filtering out noise and highlighting actionable signals. CUSUM is a powerful tool that continuously tracks cumulative deviations in market data, alerting traders when the market undergoes a significant change. For retail traders, these methods underscore the importance of watching price and understanding the underlying order flow. While you might not have access to full-depth order book data, using volume indicators and setting up alert systems can help you capture the essence of these insights, providing a valuable edge in your trading decisions. ----------------- Disclaimer The content provided in my scripts, indicators, ideas, algorithms, and systems is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or a solicitation to buy or sell any financial instruments. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
COINBASE:BTCUSDEducation
by Zeiierman
2
Closing Auctions: How Order Imbalances Shape Market Prices█ The Final 15 Minutes: How Closing Auctions Determine Market Pricing Every trading day ends with one of the most crucial events in financial markets — the closing auction. While many traders focus on intraday price movements, understanding the dynamics of closing auctions can provide valuable insights and profitable trading opportunities. █ What Are Closing Auctions? Closing auctions are special trading sessions held at the end of the day across major and minor exchanges worldwide. They determine the official closing price of securities based on Market-on-Close (MOC) and Limit-on-Close (LOC) orders submitted before the market officially closes. These auctions are essential because institutions, index funds, and ETFs use the closing price for portfolio valuation, index tracking, and arbitrage strategies. In recent years, closing auction volumes have surged, now accounting for about 11% of total daily trading volume. █ Why Have Closing Auctions Grown in Importance? The increasing popularity of Exchange-Traded Funds (ETFs) is one major factor behind the growth of closing auctions. ETFs must ensure their prices align with the net asset value (NAV) of their holdings, and arbitrageurs use the closing auction to correct price imbalances. Additionally, large institutional investors prefer closing auctions to execute substantial trades with minimal market impact. These factors have led to a rise in order imbalances — where buy and sell orders significantly diverge — during the closing session. █ How Do Order Imbalances Affect Prices? Studies have found that stocks with large order imbalances tend to experience price distortions in the last 15 minutes of trading. Stocks with high buy imbalances typically outperform those with high sell imbalances during this period. However, about 83% of this price impact reverses over the next three to five days, suggesting a short-term trading opportunity. ⚪ Example: At 3:55 PM, the exchange releases imbalance data: Buy Imbalance: +500,000 shares (demand is high) Sell Imbalance: -200,000 shares (supply is lower) Since there are more buy orders than sell orders, buyers are forced to increase their bid prices to get filled. As a result, the price moves up sharply, reflecting the strong demand. This is exactly what we see in the chart—the buy-side midpoint jumps higher than the sell-side midpoint drops, confirming a buy-heavy imbalance in the closing auction. █ A Profitable Trading Strategy Based on Order Imbalances Based on historical data, traders can exploit these patterns using two different strategies: ⚪ Momentum Strategy (Short-Term): Buy stocks with the largest buy-side imbalances and short stocks with the largest sell-side imbalances 15 minutes before the market close. Close positions at the market close. ⚪ Reversal Strategy (Over Multiple Days): Do the opposite—short stocks with the highest buy imbalances and go long on stocks with the highest sell imbalances at the close, holding positions for about five days. Backtests of this strategy show that the momentum approach can yield approximately 32 basis points per trade, translating to an annualized return of 80% when executed systematically. However, traders must account for transaction costs and slippage. █ Real-World Example: NYSE Closing Auction Data for AAP (02/20/2025) To better understand how closing auction imbalances impact price movements, let's analyze the NYSE imbalance data for AAP on February 20, 2025. The data provides three key insights: Imbalance Trends: At 15:55 and 15:56, AAP had significant sell imbalances (-40,849 and -40,718, respectively). However, this shifted at 15:57, showing a smaller sell imbalance (-13,023), followed by a net buy imbalance at 15:58 (+11,403) and 15:59 (+6,764). The final imbalance before dissemination was -34,286. Paired Quantity Increase: The paired quantity, representing executed trades, consistently increased from 258,135 at 15:55 to 311,382 by the final dissemination, indicating heightened auction activity as the market prepared to close. Impact on Clearing Price: AAP's price began at $42.17 but surged to $44.66 by 15:58, aligning with buy imbalances. However, the price slightly retraced to $44.34 at final dissemination, reinforcing the tendency for short-term reversals after strong closing auction moves. This example highlights how traders can monitor closing auction imbalance data to anticipate price behavior in the final minutes of trading. For a more interactive exploration, check out the NYSE’s Closing Auction Imbalance Analysis Tool. █ What Does This Mean for Retail Traders? Pay Attention to the Closing Session: Many traders overlook the last 15 minutes of the market, but this period offers crucial insights into order flows and institutional activity. Watch for Order Imbalances: Exchanges like the NYSE release imbalance data at 3:45 PM, giving traders a window to react before the market close. Avoid Chasing Closing Prices: Since price reversals are common, buying into a strong closing auction rally may lead to short-term losses. Use Data & Tools to Your Advantage: Platforms like Polygon.io provide real-time and historical imbalance data, which can enhance trading decisions. █ Key Takeaways Closing auctions play a crucial role in determining end-of-day prices, affecting institutional strategies and index valuations. Order imbalances in the last 15 minutes of trading can create short-term price distortions, often reversing in the following days. Traders can capitalize on these imbalances using either a short-term momentum strategy or a multi-day reversal strategy. Understanding and leveraging closing auction dynamics can provide a significant trading edge. Closing auctions are more than just an end-of-day formality—they reveal important market sentiment and provide trading opportunities. Whether you are a day trader looking to capitalize on short-term price movements or a swing trader seeking to exploit reversals, understanding the role of order imbalances in closing auctions can give you an edge in the market. By incorporating these insights into your strategy, you can navigate the complexities of the market more effectively and make more informed trading decisions. ----------------- Disclaimer The content provided in my scripts, indicators, ideas, algorithms, and systems is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or a solicitation to buy or sell any financial instruments. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
OANDA:NAS100USDEducation
by Zeiierman
1
Silver Bullet Strategy EURUSD AUDUSD | 03/12/2024Trading the Silver Bullet strategy was tough yesterday. While many may only discuss the wins associated with their trading strategies, we encountered some losses yesterday. We entered two trades on two major currency pairs (EURUSD, AUDUSD) and aim to walk you through what happened during our trading session using the Silver Bullet strategy. At 10:00 EST, we began scouting for potential trading setups, as this marks the beginning of the Silver Bullet window, which concludes at 11:00 EST. By 10:20 EST, a Fair Value Gap (FVG) had formed on the EURUSD currency pair, presenting us with a sell bias and directing our attention to potential selling opportunities in EURUSD for the current trading session. Upon reviewing AUDUSD, we observed that an FVG had also formed at 10:20 EST, further indicating a sell bias for the currency pair. Once we establish a bias, we typically wait for a retracement into the formed FVG and only execute the trade after the candle that enters the FVG has closed. This step is crucial on our checklist because our backtesting revealed scenarios where the candle entering the FVG could proceed to hit the stop loss. This check helps us avoid entering trades under such conditions. Meanwhile, those who use limit orders may find themselves at a disadvantage in these situations. After a 20-minute wait following the formation of the FVG, we identified a trade on EURUSD that satisfied all the criteria on our checklist, and without hesitation, we proceeded to execute the trade. In this trade, since the high of candle number 1 from the entry price is approximately 7 pips, which does not satisfy the minimum stop loss requirement, we adjust it to a 10 pips stop loss, our minimum threshold. This rule ensures the trade has sufficient room to fluctuate. Immediately after executing the EURUSD trade, we identified another opportunity with AUDUSD that met all the criteria on our checklist. As it fulfilled the necessary requirements, we proceeded without hesitation to execute the trade. Please be aware that we risk 1% of our trading account on each trade. This level of risk is acceptable for us, as it's an amount we're comfortable with potentially losing, thus preventing emotional attachment to the trades. Ten minutes after initiating a sell position on EURUSD, our trade reached the stop loss, resulting in a 1% loss for the day. Consequently, we are left with our sell position on AUDUSD. After incurring a loss on EURUSD, we examined the AUDUSD position and found that this trade was also facing a drawdown. Did we experience any emotions upon realizing we might lose 2% that day? No, because we had already accepted the risk and were prepared for any outcome, whether it was a win or a loss. We were aware that the strategy's win rate was around 48%, indicating that losses are a part of the process. However, with a positive risk-to-reward ratio, our wins are expected to outweigh the losses. While awaiting the outcome of the AUDUSD trade, we noticed a setup on USDCAD where a Fair Value Gap (FVG) had formed. However, upon closer inspection, we realized it materialized exactly at 11:00 EST. This timing meant we couldn't engage in the trade, as our checklist mandates that trades must be executed before 11:00 EST, thus invalidating this setup. It's important to note our discipline here; despite the temptation, we didn't enter another trade out of revenge. Instead, we let it pass because it failed to meet certain criteria on our checklist. Discipline is a crucial quality of a successful trader and should never be underestimated. Upon reviewing the AUDUSD trade once more, we observed that it was no longer in a drawdown; instead, the trade had returned to our entry price. Consequently, there was no action required other than to allow the trade to proceed as it will After being in the trade for an hour and 10 minutes, the AUDUSD position hit the stop loss, putting us down 2% for the day. Indeed, we took two losses and it's likely we'll face more, as that is the nature of trading. It's normal to encounter multiple losses throughout your trading career, and it's crucial not to let them discourage you. Ensure that any strategy you use has been thoroughly backtested and has the data to support its long-term profitability. Also, make certain that your wins consistently exceed your losses, so that during a losing streak, just a few wins can compensate for the losses.
Education
by CleoFinance
1
Trading GBPUSD | Judas Swing Strategy 15/10/2024Last week proved challenging for the Judas Swing strategy, with three consecutive losses and no wins, which heightened our anticipation for this week. Will we be able to break this losing streak? We'll soon find out. We typically arrive at our trading desks five minutes before the session starts to delineate our zones and settle into the trading rhythm. After delineating our zones, the next step is to wait for a sweep of a high or low of the trading zone, which will assist us in establishing our bias for the trading session. Forty-five minutes later, price swept the liquidity at the high, indicating that we should look for selling opportunities during this trading session. A few minutes after the high was swept, we observed a Break of Structure (BOS) on the sell side, which was encouraging as we avoid entering trades without analysis, even with a sell bias established for the session. Upon identifying the BOS, the next step is to find a Fair Value Gap (FVG) within the price leg that broke structure. The final step in the entry checklist is to wait for price to pull back into the Fair Value Gap (FVG) and to execute the trade only after the candle that enters the FVG has closed. Shortly after, a candle entered the FVG, indicating that we could execute our trade following the close of the candle. It's crucial to understand that by risking only 1% of our trading account for a potential 2% return, we minimize emotional attachment to the trades since we're only risking what we can afford to lose, and we stand to gain more than we risk. After executing the trade, we experienced a significant drawdown, which is a critical point for those who risk more than they can afford to lose. After a patient wait, the trade has turned around and begun to move in our favor, which is thrilling. However, we must still keep our composure as the objective has not yet been achieved According to our data, we can anticipate being in a position for an average of 11 hours, so the duration of this trade meeting our objective is not a concern; we simply need to remain patient for it to occur. After 15 hours and 20 minutes, our patience was rewarded when our take profit (TP) target was reached, resulting in a 2% gain on a trade where we risked 1%.
Education
by CleoFinance
Trading EURUSD | Judas Swing Strategy 05/09/2024At 08:25 EST, we were at our trading desk, eager for opportunities the trading session might offer. We began our session by marking out our trading zones. After an hour and a half, we observed a sweep of liquidity at the high of the zone, signaling potential selling opportunities in this trading session. Shortly after the liquidity sweep, there was a structural break to the downside, bolstering our confidence in the emerging setup. The next step was to wait for a retracement into the freshly formed Fair Value Gap (FVG). We have finally seen price trade back into the Fair Value Gap (FVG). After the closure of the candle that retraced into the FVG, we can execute our trade since all the criteria on our checklist for trade entry have been fulfilled. This trade experienced a drawdown for just five minutes before price began to move favorably in our anticipated direction. Patience is key as we await the trade's result. Whether it results in a win or a loss, we are prepared for either outcome since we have risked only 1% of our account, targeting a 2% return. Upon reviewing the position, we found it had returned to our entry point. At such a juncture, traders who have risked more than they can afford may panic. However, our comprehensive backtesting data on this strategy reinforces our confidence in the strategy, risk management approach and the importance of trusting the process. We were unlucky this time as the trade hit our stop loss and we lost 1% on this trade. The Judas Swing strategy is a simple strategy any trader can add to their arsenal. A trader simply needs to be present between 08:30 and 11:00 EST to look for trading setups. While not the "holy grail", this strategy boasts a win rate of approximately 50% and a risk-reward ratio of 1:2
Education
by CleoFinance
1
Trading EURUSD | Judas Swing Strategy 30/07/2024Risk management ought to be a trader's closest ally, as the previous week demonstrated the practical significance of incorporating risk management into every trader's toolkit. Last week, we executed four trades; despite having only one win and three losses, we concluded the week with a mere 1% loss on our trading account. This has heightened our excitement for the opportunities that this week may present. As is customary, at 8:25 AM EST, we commenced the day by reviewing the essential items on our Judas Swing strategy checklist, which comprises: - Setting the timezone to New York time - Confirming we're on the 5-minute timeframe - Marking the trading period from 00:00 - 08:30 - Identifying the high and low of the zone The next 5 minute candle swept liquidity resting at the low of the zone, which meant our focus would be on identifying potential buying opportunities for the trading session. To increase the likelihood of success of our trades, we wait for a break of structure (BOS) towards the buy side. Once the BOS occurs, we anticipate price to retrace to the initial Fair Value Gap (FVG) created during the formation of the leg that broke the structure. We patiently waited for price to retrace into the created Fair Value Gap (FVG), and executed our trade upon the closing of the first candle that entered the FVG, as all the conditions on our checklist for trade execution were satisfied. Please note that our stop loss is set at the low of the price leg that broke structure, and we implement a minimum stop loss of 10 pips. The minimum stop loss value was not chosen randomly; it was determined through extensive backtesting. This allows trades sufficient space to fluctuate, avoiding premature stop-outs and trades later moving in our anticipated direction. After 15 minutes, a large bearish marubozu candle formed, which could have exited us from the trade if we had set our stop loss solely based on the low of the price leg that broke structure, without including a minimal stop loss in our checklist. By using that price leg, our stop loss would have been around 6 pips, whereas a 10 pip stop loss provides the trade with sufficient breathing room. We are aware that our strategy does not guarantee a 100% win rate but rather hovers around 50% on EURUSD, indicating that some losses were inevitable. To avoid becoming emotional over the position, we used only 1% of our trading account with the goal of achieving a 2% gain. Upon checking our position later, we observed that the position was a few pips away from hitting SL. We remained calm despite the drawdown we were experiencing and were prepared for any outcome of the trade. All that was left was to wait for either our stop loss or take profit to be triggered to determine the result of our trade. A few hours later, the trade began to move in our favor. After 13 hours, our Take Profit was triggered, and our patience paid off as we hit our target on EURUSD, resulting in a 2% gain from a 1% risk on the trade.
Education
by CleoFinance
Trading AUDUSD | Judas Swing Strategy 17/06/2024 Following a successful trading week, we approached our trading desks in high spirits, eagerly anticipating the start of the trading session. While our week included trading FX:EURUSD , FX:GBPUSD , OANDA:NZDUSD we’re showing this classic example using $AUDUSD. At 8:25 AM EST, we began the day by running through the essentials on our Judas Swing strategy checklist, which includes: - Setting the timezone to New York time - Confirming we're on the 5-minute timeframe - Marking the trading period from 00:00 - 08:30 - Identifying the high and low of the zone Now that our zones are demarcated, we anticipate a liquidity sweep on either side of the trading zone, as this will assist in establishing a bias for the trading session. Liquidity was taken at the lows after 5 minutes, signaling our focus would be on identifying potential buying opportunities. To increase the likelihood of success of our trades, we wait for a break of structure (BOS) towards the buy side. Once the BOS occurs, we anticipate price to retrace to the initial Fair Value Gap (FVG) created during the formation of the leg that broke the structure. We patiently waited for price to retrace into the created Fair Value Gap (FVG), and executed our trade upon the closing of the first candle that entered the FVG, as all the conditions on our checklist for trade execution were satisfied. Ideally, our stop loss should be set at the low of 0.65854, but that would place our stop loss at approximately 6 pips, which is too tight for our strategy. Extensive backtesting has shown that tight stop losses are often triggered before price reverses and moves in our intended direction. Consequently, we have implemented a minimum stop loss of 10 pips for all our trades. After executing the trade, we experienced a minor drawdown for approximately 25 minutes before price shifted in our favor. During the drawdown, we remained calm as we had only risked 1% of our trading account with the goal of achieving a 2% return. Price was progressing well in our direction, and all that was required of us was patience for the Take Profit (TP) to be reached. We expected to be in this trade for roughly 8 hours and 6 minutes, so we stayed composed and had faith in our strategy. After 3 hours and 50 minutes, our Take Profit was triggered, and our patience paid off as we hit our target on AUDUSD, resulting in a 2% gain from a 1% risk on the trade.
Education
by CleoFinance
Imbalance Expert : Guide for mastering imabalance'sCryptocurrency trading is an intricate dance, where understanding and interpreting market imbalances can provide traders with a competitive edge. This comprehensive guide aims to demystify the art of trading imbalances, catering to both beginners and seasoned traders. Through a detailed exploration of strategies and considerations, we'll delve into the world of market dynamics, emphasizing the importance of a holistic approach to trading. First example has cool reason to go higher ( EQUAL HIGHS ) and big liquidity pool below Section 1: Understanding Imbalances 1.1 Defining Market Imbalances: Explore the concept of imbalances in the cryptocurrency market. Differentiate between bullish and bearish imbalances. 1.2 Reading the Signs: Learn to identify imbalances on various timeframes. Utilize technical indicators and chart patterns to confirm imbalances. Section 2: The Anatomy of Imbalance Trading 2.1 Spotting Imbalances in Price Action: Analyze real-world examples of imbalances using provided screenshots. Understand how imbalances manifest in different market conditions. 2.2 Tools of the Trade: Explore popular tools like volume analysis, order flow, and market profile to complement imbalance trading. Highlight the role of moving averages and trendlines in confirming imbalances. Section 3: Strategies for Imbalance Trading 3.1 Swing Trading with Imbalances: Discover how to swing trade using imbalances as entry and exit signals. Explore risk management techniques tailored for swing trading. 3.2 Scalping Opportunities: Uncover strategies for intraday trading based on short-term imbalances. Discuss the importance of quick decision-making and tight risk control. Section 4: Advanced Considerations 4.1 Macro and Micro Analysis: Emphasize the need to consider both macroeconomic trends and micro-level price action. Discuss how macroeconomic events can create imbalances with lasting effects. 4.2 Market Sentiment and News Analysis: Incorporate sentiment analysis and news events into the overall imbalance trading strategy. Understand how sudden shifts in sentiment can create imbalances. Section 5: Risk Management and Psychology 5.1 Risk Management Strategies: Explore risk management techniques specific to trading imbalances. Discuss the importance of position sizing and setting stop-loss orders. 5.2 Mastering Emotional Discipline: Address the psychological aspects of trading and how emotions can impact decision-making. Provide practical tips for maintaining discipline during trading. Conclusion: The Art and Science of Imbalance Trading In conclusion, mastering the art of trading imbalances requires a combination of technical expertise, strategic thinking, and emotional resilience. Whether you are a beginner looking to enter the world of cryptocurrency trading or a seasoned trader seeking new insights, this guide aims to equip you with the knowledge and tools necessary to navigate the dynamic landscape of imbalance trading. Remember, success in trading is an ongoing journey that requires continuous learning and adaptation to evolving market conditions. 💡 Imbalances Decoded | 📊 Tools of the Trade | 🚀 Strategies for Success | 🧠 Risk Management Mastery 💬 Share your insights: What are your experiences with trading imbalances, and what additional strategies have you found effective? 🌐✨
INDEX:BTCUSDEducation
by Yaroslav_Krasko
Unlocking the Secrets of Price Inefficiency: Dive Deep into FVG👑Price inefficiencies are also known as imbalances, gaps or voids. Healthy price action moves in a zigzag fashion, making highs and lows in line with the directional bias at any given moment. When price isn’t trending we find it consolidates, in which case highs lows are still being made. However, we may also see price move in straight lines with huge volume and momentum. When this happens, price finds itself unable to deliver price in an efficient manner. For example, in a bullish environment, price may continue to make higher highs without providing higher lows at a discount price. When price moves with this much momentum, it leaves behind imbalances. 🟠An imbalance can be identified by open space in price action, where the wicks on either side of a candle do not match each other. On the left is an example of price inefficiency, since the wick high of candle 1 does not meet the wick low of candle 3, leading to an imbalance on candle 2. 🟠This is an example of healthy price action with no imbalances. This is because all candles have wicks on either side of them. Since wicks were bodies during live price action and are bodies on lower time frames, this shows that price was delivered efficiently to buyers and sellers in this area. Whereas the example above shows an imbalance on a bullish candle, which shows that price was only available to buyers in that imbalance and therefore is not efficient. 👉For price to be efficient, it needs to be delivered to buyers and sellers. This helps us understand that in our original bullish imbalance, price has to come back and fill that imbalance using bearish price action in order to make that price available to sellers. This re-balancing could take hours, days, weeks or years, but it is our job to understand that it must happen at some point. Inline with the rest of the strategy, we can use this knowledge to pick out the specific imbalances that will be filled and how we can capitalise on this. 🟠This is an example of the correctly identified imbalance and where we expect price to react from 🟠This is an example when is our level being met, it is at this point that we use the rest of the strategy and knowledge to capitalise on the move that is about to unfold with high risk:reward entries. 🟠This is the completion of this particular market cycle, with our level being respected and price giving us a nice bullish leg. 🔴Bearish Order Flow: 🟢Bullish Order Flow:
CAPITALCOM:US500Education
by algoat
⚖️ Auction Market Theory📍Auction Market Theory, developed by J. Peter Steidlmayer and expanded upon by Jim Dalton in his book Mind Over Markets, explains how financial markets function as auctions where buyers and sellers interact. The theory focuses on two main objectives: facilitating trade through a two-way auction process and determining the fair value of assets. Supply and demand dynamics and price discovery play a crucial role in this process. Auction Market Theory is represented using tools like Market or Volume Profile, which utilize bell-shaped curves to identify the value area, representing 68% or 1 standard deviation from the mean. 🔷 In a balanced market , buyers and sellers agree on prices based on their perception of fair value. This leads to lower volatility and prices that remain relatively stable, resulting in a ranging market. The fair value can be recognized using the Market or Volume profile, which appears as a Gaussian bell-shaped curve. However, financial markets rarely stay in balance indefinitely. New information, whether fundamental or technical, causes markets to move away from fair value and transition into a different environment. 🔷 Imbalance refers to the opposite of balance, where there is a disagreement about fair value. In this scenario, one side of market participants becomes more aggressive, leading to a trending market. Typically, markets tend to trend only about 20% of the time and range about 80% of the time. When the market is within the value range, it is more likely to remain in balance and explore within that range. However, in the case of an imbalance, the market often drifts higher or lower until it reaches a stop, typically within a previous value area. 💥Key Takeaways: 🔸 Auction Market Theory explains how financial markets function as auctions, focusing on facilitating trade and determining fair value. 🔸 Supply and demand dynamics and price discovery are essential in the Auction Market Theory process. 🔸 Tools like Market or Volume Profile use bell-shaped curves to identify the value area, representing 68% or 1 standard deviation from the mean. 🔸 In a balanced market, buyers and sellers agree on prices based on their perception of fair value, leading to lower volatility and a ranging market. 🔸 Financial markets rarely stay in balance indefinitely, as new information causes them to move away from fair value and transition into different environments. 🔸 Imbalance occurs when there is disagreement about fair value, leading to a trending market. 🔸 Markets tend to trend about 20% of the time and range about 80% of the time. 🔸 When the market is within the value range, it is likely to remain in balance and explore within that range. 🔸 Imbalanced markets often drift higher or lower until they reach a stop, usually within a previous value area. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
2
Imbalance- Today we will talk about imbalance. What exactly is an imbalance, and how to recognize it? - Imbalance can often occur in forex due to many reasons. Imbalance can move upwards or downwards. - Most of the imbalances get filled up within minutes, hours or in one daily session. But it is not always like that, some can take days to fill up. - Imbalance is like a gap, it drives the price to go in the direction where it made the imbalance in order to fill it up. - We can use all that information in our favour to maximize our edge in the markets in different ways. - Here we have 2 examples, on the left example, the price left an imbalance, but on the right, it did not. How? - At first glance, these 2 examples look totally the same, but they are not. In the example on the left, the price left an imbalance, and the wicks are not touching, while on the left side the wicks are touching and therefore we do not have an imbalance as in the first example. - If this post helped you better understand imbalance and its role, leave a like and follow us for more content like this.
Education
by hybridtradingfx
⁉️ What is an Imbalance?‼️ Imbalances are also known as inefficiencies or FVG (Fair Value Gaps) these are periods in price action whereby means of lopsided order flow, which create porous wakes or gaps in fills. The market will slip to the only available trade levels as a result of thin liquidity and these voids in liquidity will be revisited at a later stage. The market will seek to fill in any missing gaps or missed levels on a trade. Impulse price swings are typically seen with this voids in liquidity. In simple terms imbalances are gaps in the market and the market will always seek in to close or fill those gaps.
Education
by Snick3rSD
IMBALANCE ORDER- FILLED!Yesterday EU went Parabolic and didn't give anyone else a chance to get in at those prices. So this morning price is FILLING IMBALANCES. This chart illustrates this every day move in real time. The Market goes up. The Market goes down. The Market goes sideways. 3 moves. Price moves to fill 1. Imbalances 2. Liquidity Our job is to identify these moves and formulate strategies to help us Capitalize on the Money Moves aka Trends out of Consolidation and Ranging Zones. Never over leverage. Trust your trade set up. Have fun!
Education
by Master-Jedi-Trader
⁉️ How to identify imbalances? ‼️ Imbalances are also known as inefficiencies or FVG (Fair Value Gaps) these are periods in price action whereby means of lopsided order flow, which create porous wakes or gaps in fills. The market will slip to the only available trade levels as a result of thin liquidity and these voids in liquidity will be revisited at a later stage. The market will seek to fill in any missing gaps or missed levels on a trade. Impulse price swings are typically seen with this voids in liquidity. In simple terms imbalances are gaps in the market and the market will always seek in to close or fill those gaps.
FX:JPYBASKETEducation
by Snick3rSD
4
ICT IMBALANCE / FVG / LIQUIDITY VOIDLiquidity void, Fair Value Gap, Imbalance... These terms are interchangeable. As a Charter Member ill tell you what I've shown here, is a basic depiction, as I got asked a question on what is an imbalance? An imbalance, is an imbalance in price, where price has NOT efficiently delivered orders in the market, price will like to revisit these areas, of imbalance, as seen here. The diagram on the left depicts the ideal model of what an imbalance is, the chart on the right is an in time example. if you notice one of these getting filled, at a place where you are bearish/bullish... well.... there is your trade!
FOREXCOM:XAUUSDEducation
by UnknownUnicorn37378565
3
Conservative vs Aggressive Entries - Different ways to enter!There are different ways to enter trades - some opt for an aggressive approach while others opt for a conservative entry. Aggressive entries are taken at the first signs of reversal out of a supply/demand zone while conservative entries wait for more significant larger structure breaks in the trend. I almost always opt for the conservative take as I want structure to be with me all the way. By getting in with an aggressive entry you can achieve higher risk reward but you will also inevitably run into more losses because you are relying on the short term trend to confirm your higher timeframe intensions. It comes down to your risk tolerance: Conservative entries require patience and sometimes when they don't give an entry you'll need discipline to avoid getting burned - but they are the wiser option for risk averse traders. Aggressive trades will get you in on nearly every move you have planned but they'll also get you took out a fair amount more than conservative entries. How much pain can you take? I recommend choosing an approach and sticking to it - being a master of one approach is better than a novice at many!
Education
by jeafxtrading
3
Tracking MOC vs SPY (also potential Long Signal)First off, MOC and MOC Imbalances are two things I am still in the process of learning and understanding better, so I am not claiming to be an expert on the topic. Please chime in if I have wrote anything incorrect or if you have something valuable to contribute! A Market-On-Close (or "MOC") order is an order sent to trigger near the market close. We see this pretty routinely trigger 10 minutes before the closing bell, and it often produces some fireworks with sudden, spiky moves in one direction or the other. There is often an imbalance in one direction-- Buy, or Sell-- which can sometimes seem random, but when smoothed can help show flows into the market or out. I took a little bit of time to just color the periods on SPY in the last year or so for the 4 scenarios of the 20 day moving average of MOC imbalance. They are as follows- DARK RED MOC is Below 0 and Increasing in that direction --> Sell Imbalance LIGHT RED MOC is Below 0 and Decreasing/Reversing LIGHT GREEN MOC is Above 0 and Increasing in that direction --> Buy Imbalance DARK GREEN MOC is Above 0 and Decreasing/Reversing I think you could generally say these phases of the MOC Imbalance correlate with SPY. The two phases of Light Red and Light Green (moving from a Sell Imbalance to Buy Imbalance) have generally shown to be good old fashioned bull fun. Dark green often is a profit taking phase. Dark red is usually when its too late or just the start of the descent. Here are crude measurements of the light red and light green phases, their gains and length of time- +4.39% in 44 days +7.27% in 50 days +4.22% in 30 days +4.50% in 24 days +4.55% in 45 days +25.00% in 31 days +15% in 24 days Presently, so far: +4.15% in 15 days The times I did not include, which are obviously the recent outlier, is from February to early March. If you had a good chart of the 20sma MOC in front of you like I do, you could see there were a couple times when it looked like the MOC had reached its bottom and was going to start reversing and heading towards a Buy Imbalance, only to get rejected and keep selling. The actual confirmed bottom never happened until March 20th, so you could say that was the true start of this light red colored area, but I felt it was relevant to still color those as if it was a real-time scenario. It also helps show how that crash really manifested itself, with a lot of traders/investors thinking the end of February is just a dip or buying opportunity, to manifest into a rug pull. Myself and others have been thinking this week and last that a melt-up is on its way, and the MOC turning above 0 today to a Buying Imbalance could be a great bit of data to possibly confirm this. Where do you find MOC Reports? I only started looking at them recently from Market Chameleon so unfortunately I do not have any great resources to point people towards other than Market Chameleon. I hear that its publicly disseminated information, though. Here's their -free- daily report- marketchameleon.com They also have a more aggregated report, which is what I used, but that is behind a pay wall.
AMEX:SPYEducation
by chrism665
5