Lesson 04
Balance and imbalance
The market spends most of its time in balance, trading back and forth inside a range. Now and then one side takes control and price moves directionally until it finds a new balance.
In one lineBalance means rotate and fade the edges. Imbalance means price is travelling, so do not stand in front of it.
Two states
- Balance. Two-sided trade. Price rotates between edges, value areas overlap from one period to the next, and moves away from the middle tend to come back.
- Imbalance. One side is in control. Price leaves the range, moves fast through prices with little trade, and keeps going until the other side shows up again.
Balance, a fast move, then a new balance higher. The profile shows two fat areas with a thin one between: the market accepted both levels and travelled quickly between them. Illustration from simulated prices, not a real session.
How to tell which one you are in
- Is price making new highs or lows and staying there? That points to imbalance.
- Is value (where most volume trades) moving each period, or overlapping? Overlap means balance.
- Are moves away from the middle getting pulled back? That is balance doing its job.
Key terms
BalanceTwo-sided trade inside a range; value overlaps.
ImbalanceOne-sided trade; price travels to find new value.
RotationA swing from one side of a range to the other.
Range extensionPrice trading beyond the range set earlier in the day.
Try it
Look at the last five sessions. Label each one: mostly balance, mostly imbalance, or balance-then-move. You will find balance is the usual state.
AXIS Desk · AMT Fundamentals · free. Education only, not trade advice. Futures trading involves substantial risk of loss; past patterns do not guarantee future results.