What Is an Imbalance in Trading?
And how my free TradingView indicator marks them for you
In trading, imbalances (also known as market inefficiencies or fair value gaps) represent areas on the chart where price moved too quickly, leaving behind zones with little two-way trading. Price sometimes revisits these areas, so traders use them as reference points when planning entries or exits.
My free TradingView script, the Imbalance Finder, automatically highlights these zones using simple 3-candle logic.
How It Works
The script analyzes three consecutive candles. When there's a gap between the wicks of the first and third candle, that gap is considered a potential imbalance.
When an imbalance is found:
- A box is drawn to mark the zone.
- As price begins to re-enter the zone, the box border switches from solid to dashed, giving you a visual cue that the imbalance is being filled.
It's a visual way to track where price may return. It doesn't predict whether a zone will hold, so most traders combine it with structure, levels or other confluence.
Customization Options
The latest version of the script (written in Pine Script v5) includes:
- Custom colors for both candles and imbalance boxes
- Box limit toggle so you can control how many imbalances appear on your screen
- Adjustable box limits to manage chart clutter
Using the Indicator
The Imbalance Finder is currently available as a free public indicator on TradingView. You can add it to your chart from the script page:
View the Indicator on TradingView
Planned Improvements
I'm working on an extended version of the indicator. Features under consideration include:
- Multi-timeframe imbalance tracking
- Real-time alerts
- Grouping overlapping imbalances
- Full/partial fill metrics
There is no release date yet. If you want to give feedback on what to build next, follow me on TradingView or join the update list on the indicator page.
– PatrickWS