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The Imbalance Tracker is a powerful tool for monitoring the order book imbalance of every liquid instrument available. With a historical view of imbalances, it provides a keen understanding of how they have evolved over time. This indicator also sends a notification when an imbalance threshold, set in advance, is met. Not just that, it can alert you when the zero line of the imbalance in the sub-chart experiences a shift from one side to another.
Markets are always striving to achieve a balance between buyers and sellers. However, when an imbalance arises, prices typically shift towards the side of the order book that carries more weight. This insight is invaluable to traders who gauge the market’s current and future direction. Zero-cross signals provided by the Imbalance Tracker are also useful for understanding broader market shifts. Furthermore, it helps identify congestion zones that represent market indecisiveness and are typically best avoided for trading. Once these congestion zones are cleared, the tool will provide you with an update.
The Orderbook Imbalance refers to the divergence between the count of quotes on the Bid and Ask sides, divided by their total. Essentially, it provides a snapshot of which side of the orderbook has a larger accumulation of quotes.
A fundamental strategy, based on the premise that liquidity magnetizes prices, is to monitor these imbalances over time. However, it’s crucial to approach this strategy with a discerning eye. From our extensive trading experience and professional perspective, we recommend not focusing solely on transient imbalances. Instead, consider them as part of a broader market trend and strategy.
The Imbalance Tracker shows us the imbalance line in the sub chart where we can track the historical development over time and alerts the user when a certain threshold of imbalance is reached.
Settings window for Imbalance Tracker
Imbalance LineThe Imbalance Line, presented in the sub-chart, visually represents the Orderbook Imbalance’s historical progression and current value.ColorsYou can personalize the colors of both the Imbalance Line and the Zero Line in the sub-chart. Just click on the color options to make your selection. By default, the Ask Imbalance appears as Light Red, the Bid Imbalance as Light Green, and the Zero Line as White.
DOM Level from and toThe imbalance calculation relies on a user-defined price range within the orderbook, with the current traded price level serving as a reference point. Adjust this range based on the specific market situation of the traded instrument. In the given example, the imbalance calculation is set between 1 tick to 60 ticks from the current price level on both Bid and Ask sides of the orderbook.
Imbalance AlertsYou can customize Imbalance Alerts to receive signals when the imbalance hits a particular threshold. These alerts are conveniently displayed on the chart. By default, these are shown as small colored triangles below or above the traded price, correlating to an imbalance equal to or exceeding user-defined parameters.Trigger (%)You can define the imbalance value, or the trigger percentage, at which the chart displays the signal. For instance, in the given example, a signal will appear when either the Bid Imbalance surpasses the Ask Imbalance by 20% (Green triangle) or the Ask Imbalance exceeds the Bid Imbalance by 20% (Red triangle).Signal DesignClick on the “Edit” button to tailor the chart’s signal. You can define the color, symbol, size, position, and price display options to match your preferences. Customize your trading interface to make the most of your strategy.
Read more about Orderbook Imbalance #
Read as well: WHY DOES THE PRICE GO AWAY FROM IMBALANCE?