Imbalance DetectorImbalance Detector

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Imbalance Detector

This indicator detects and highlights market imbalances alongside a dashboard returning information about their frequency of occurrence and their fill percentage

This indicator detects and highlights market imbalances alongside a dashboard returning information about their frequency of occurrence and their fill percentage. Imbalances included in this script are Fair Value Gaps (FVG), Opening Gaps ( OG ) and Volume Imbalances (VI).

Alerts are available for the occurrences of all market imbalances.

Settings

Imbalances

Each imbalance has the same settings layout:

  • Imbalance: Enable/disable the detection of the specific imbalance.
  • Min Width: If enabled, requires the imbalance area width to be greater than the specified value. This minimum width can be expressed in points, percentages or ATR multiples.
  • Extend: Extend imbalances by a specified number of bars.
Dashboard
  • Show Dashboard: Enable/disable the dashboard on the chart.
  • Dashboard Location: Location of the dashboard on the chart.
  • Dashboard Size: Size of the dashboard.

Usage

Market imbalances are part of the many concepts available to price action traders and highlight areas where there is a disparity between supply and demand .

It is common to see price come back to these areas and traders often use them as supports and resistances but also as targets.

Details

The script can detect three distinct types of imbalances described below.

Fair Value Gaps

Fair Value Gaps (FVG) are three candle formations characterized by a gap between the wicks of the non-adjacent candles in the formation.

A bullish FVG is characterized by a gap between the current price low and the 2 bars anterior price high, and a bearish FVG is characterized by a gap between the current price high and the 2 bars anterior price low.

Opening Gaps

Opening Gaps ( OG ) are imbalances characterized by non-existent activity within a specific price range.

A bullishOG occurs when the current price low is greater than the previous high, a bearishOG occurs when price high is lower than the previous price low.

Opening Gaps primarily occur in closing markets, as such they are less common in the cryptocurrency market.

Most of the time an Opening Gap will also be accompanied by a Fair Value Gap, in order to avoid clutter the indicator will not detect Fair Value Gaps if Opening Gaps are enabled and if an Opening Gap has been detected

Volume Imbalances

Volume Imbalances (VI) are characterized by a price discontinuity between the opening price and previous close, but unlike Opening Gaps we do not see nonexistent activity within a certain price range.

A bullish VI occur when both the opening and closing prices are superior to the previous closing price, with the current price low overlapping the previous price high. A bearish VI occur when both the opening and closing prices are inferior to the previous closing price, with the current price high overlapping the previous price low.

Because Volume Imbalances can occur excessively on markets with frequent gaps, we make use of an additional condition for filtering out less significant imbalances. Bullish VI's will require the previous price high to be lower than the opening price, while bullish VI's will require the previous price low to be higher than the opening price.

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