⚖ī¸Imbalance Concepts

Identifying Market Imbalances:

The market can become imbalanced when there's a significant difference between buying and selling pressure, leaving unfilled gaps on the chart. These gaps often represent inefficiencies that the market may try to fill later, potentially impacting future price movements.

The Smart Money Concepts toolkit helps you identify these potential inefficiencies through:

  • Fair Value Gaps (FVG): These highlight areas where price potentially moved through significant support or resistance without sufficient buying or selling activity to fill the gap.

  • Breakers Fair Value Gaps (FVG): This variation focuses on gaps specifically occurring in "breaker" zones, where price broke through key support/resistance levels.

By recognizing these potential imbalances, you can gain insights into where price might attempt to return and adjust your trading strategy accordingly.

Fair Value Gaps

Understanding Fair Value Gaps (FVGs)

Fair Value Gaps (FVGs): These are gaps on the chart that often represent areas of imbalance between buyers and sellers. They occur when the price makes a significant move up or down, leaving a "gap" between the previous and next candles' highs and lows. This gap signifies that there was limited buying or selling activity at those price levels.

Why are FVGs important?

The market often attempts to fill these inefficiencies later, meaning price may return to the FVG zone before continuing its original direction. Identifying FVGs can help you:

  • Anticipate potential support or resistance: If price approaches an FVG, it may find renewed buying or selling interest there, potentially causing it to stall or reverse.

  • Refine entry and exit points: By understanding FVGs, you can potentially identify areas where price may retrace before continuing its trend, allowing you to refine your entry or exit points.

Remember, FVGs are just one tool in your trading toolbox. Always conduct thorough analysis and manage your risk effectively before making any trading decisions.

Breakers Fair Value Gaps

Understanding Breakers and Breaker FVGs

Breakers: These are areas on the chart where price potentially broke through significant support or resistance levels. They can signal potential future support or resistance zones.

Breaker Fair Value Gaps (Breaker FVGs): These are a specific type of FVG that occurs after a normal FVG has been "mitigated" (meaning the price has revisited and potentially filled the gap). Once mitigated, the FVG area can take on an opposite characteristic, acting as potential support if it was originally bullish, or vice versa.

Why are Breaker FVGs interesting?

Breaker FVGs can create interesting areas of potential price behavior when revisited by the market:

  • Price reversals: If price approaches a Breaker FVG, it may encounter renewed buying or selling pressure in the opposite direction compared to the original FVG. This could lead to potential price reversals.

  • Confirmation zones: Breaker FVGs can act as confirmation zones for existing support or resistance levels, adding weight to their potential impact on future price movements.

Remember: Like all technical indicators, Breaker FVGs should be used in conjunction with other analysis tools and proper risk management to make informed trading decisions.

Mitigation Method

MethodDescription

Close

Mitigated when the close cross the extreme of the FVG

Wick

Mitigated when the low/high cross the extreme of the FVG

Average

Mitigated when the low/high cross the average point of the FVG

User can select the ammount of imbalance to show on the chart

Multi timeframe imbalance are available to the user

Filtering Imbalances with the Threshold Input

The Smart Money Concepts toolkit offers a Threshold input to help you filter out insignificant imbalances and focus on the stronger ones. This feature allows you to:

  • Customize the sensitivity: Set the threshold level to your preference, controlling the minimum size or volume required for an imbalance to be displayed.

  • Focus on high-impact areas: By filtering out less significant imbalances, you can prioritize the areas with potentially stronger market inefficiencies, aiding your analysis and decision-making.

Remember, using the threshold effectively requires balancing your filtering preferences with capturing relevant market signals. Experiment and tailor the setting to suit your trading style and risk tolerance.

Build-in alerts are available to the user

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