The forex market hides various mysteries due to which the price of an asset can change. Even though it can be simply described as the difference in volume of demand and supply, many other driving factors trigger an increase in demand and supply.
One factor that is quite interesting to dig deeper into is order imbalance. This concept is a critical component used by the SMC (Smart Money Concept) which is a framework for focusing on studying institutional investors.
View attachment 6995
A market imbalance occurs when there is overwhelming interest from buyers (buy-side imbalance) or sellers (sell-side imbalance) without enough orders from the opposite side to match. This scenario usually reflects market participants' consensus regarding the asset's future direction.
Identifying this imbalance can be done through a specific three-candle pattern. The middle candle, or the second candle in sequence, represents an impulse movement in any direction, flanked by two candles that form the boundary of the zone. This pattern, which completes after the third candle closes, signals an imbalance, indicating rapid price movement through levels without consolidation.
This method is a bit complicated compared to other technical analysis approaches because it is mostly used by traders who adhere to the principles of the Smart Money Concept to study how institutional investors work. To learn more about order imbalance, you can study it on the FXOpen blog under the heading "What Order Imbalance Is and How To Use It in a Trading Strategy"
One factor that is quite interesting to dig deeper into is order imbalance. This concept is a critical component used by the SMC (Smart Money Concept) which is a framework for focusing on studying institutional investors.
View attachment 6995
A market imbalance occurs when there is overwhelming interest from buyers (buy-side imbalance) or sellers (sell-side imbalance) without enough orders from the opposite side to match. This scenario usually reflects market participants' consensus regarding the asset's future direction.
Identifying this imbalance can be done through a specific three-candle pattern. The middle candle, or the second candle in sequence, represents an impulse movement in any direction, flanked by two candles that form the boundary of the zone. This pattern, which completes after the third candle closes, signals an imbalance, indicating rapid price movement through levels without consolidation.
This method is a bit complicated compared to other technical analysis approaches because it is mostly used by traders who adhere to the principles of the Smart Money Concept to study how institutional investors work. To learn more about order imbalance, you can study it on the FXOpen blog under the heading "What Order Imbalance Is and How To Use It in a Trading Strategy"
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