Original subtitles

Hey everybody. Welcome back to another installment of the

Currency Pros course. Now today we're talking about imbalance.

Okay this is going to be a brief video. There's not too

much to talk about but it's definitely an important aspect

to our trading strategy that we need to cover and have a firm

understanding of. So as you can see in front of me here I have

the Currency Pros e-book pulled up. And the reason for that is

I already have a a very good description and lesson about

imbalance here. So what I'd like to do is just read through

what I've written in the Ebook. And then after we've covered I

want to go through some real life chart examples okay so you

guys can see it in action. So let's get started. One of the

main criteria we look for when identifying an order block or

refined supply and demand zone is imbalance okay. So just to

clarify this is not something imbalance is not something that

we trade solely. It's not any sort of entry criteria. As you

all know by now we trade order blocks or as some call it just

refined supply and demand zones. Um Now, imbalance and a

few other things as well which we'll go over in future videos

simply acts as confluence to build a case behind whether or

not our order block is valid or potentially invalid, okay? So,

excuse me. So, imbalance is when an order block is

responsible for creating such impulsive volume in the market

that it throws off the equilibrium between buyers and

sellers forming a gap, okay? So, to understand imbalance,

you have to understand how the market moves. Now, with the

Forex market specially there is a constant equilibrium or at

least the goal to have a constant equilibrium between

buyers and sellers okay so even in this example here you can

see all of these small candles here it's very efficient price

action okay we have selling momentum buying momentum

selling momentum buying momentum and everything gets

covered here it's very efficient balanced price action

okay but as soon as we see huge full body candles it create an

imbalance in the market as you can see here in the diagram

okay it creates a gap we have one there and we have one here

too this massive full body candles they represent that for

a certain period of time let's take this one for example for a

certain period of time only buyers were in control there is

no equilibrium between buyers and sellers there's no give and

take there's only give okay so that creates inefficiency and

imbalance in the market alright so as I say here this is

referred to as imbalance or inefficient price action short

form IPA which some people like to use now these gaps act as a

magnet for price to retrace to in order to correct the

disturbance in market equilibrium okay that's a very

important point to take note of so we don't trade based off of

these but we use it as confluence because as I place

in the diagram here below we have a lower time frame order

block maybe not visible on this time frame but a refined lower

time frame order block is in this area right up here okay

now we've set entry parameters you know we're we're expecting

we're anticipating price to trade higher towards our lower

time frame order block and then go short from there based on

our analysis right now what adds confluence to the fact

that price is going to head towards that lower time frame

order block is the fact that we have imbalance or inefficiency

in this area okay because price is drawn towards this like a

magnet in order to correct the inefficiencies okay there has

to be balance there has to be equilibrium in the market so

whenever this this happens it's very highly likely that price

is going to travel towards that area okay so when we were down

here and we located this order block up here and then spotted

inefficiency or imbalance here we can say to ourselves okay

it's very likely price is going to travel towards that

order block where we can then look for a short opportunity

okay let's head over to the next page because there's two

pages in the in the Ebook that cover imbalance So let's go

over what I wrote here. So as you can see we aren't trading

based on the imbalance zone itself. But rather using it as

confluence to strengthen our decision to target an entry

from an order block okay? An order block that acted as the

point of origin for such a disruption in price is

considered a higher probability entry point okay now let me let

me quickly cover that so there's order blocks all over

the place right this is where a lot of people get confused with

order block strategies or refined supply and demand

because they see them all over the place and many of them are

valid right but some have a higher probability than that of

working out than others do and one of the things that

increases the probability of success is the fact that that

order block was responsible for one a break of structure that

we've gone over in previous videos of course so a break in

market structure but the second main confluence is that it

actually created an imbalance it created a gap in price

action okay that's very important because like I said

it acts as a as a it it turns price into like a heat seeking

missile basically once it seek out that imbalance and correct

it and then from that point on once the imbalance slash

inefficiency is corrected then price can you and do what it

was intending to do in the first place okay so another

point here is when it comes to imbalance or efficiency

inefficiency zones there's no telling when they will be

filled okay so it could happen within a couple minutes it

could happen in a couple hours sometimes it could take a week

or a month or more it depends on the time frame you're

trading on most importantly but there's really no telling when

it's going to get filled but we know certainly that they will

fill when the time is right okay now this is why we don't

attempt to trade them on their own it's an important tool to

keep in your arsenal when analyzing the markets okay so

like I said it's not something we base our entries off of it's

something we build our case off of okay so we we find an order

block we have to check off some boxes right did it break

structure did it create imbalance is price approaching

it correctively or there's a bunch of boxes that we need to

check right so this is just another one of those boxes and

it's another tool that we can keep in our arsenal alright so

as you can see here price traveled towards that imbalance

zone filled it right around here so it corrected that

imbalance and because it already did that right it it

completed its mission then it also mitigated the lower time

frame order block that we had up here once that mitigation

was performed and the imbalance was corrected you see how price

just melts away in the direction that it was intending

on taking right and that's how we can take advantage of in the

market. We use it as confluence to strengthen our order block

and we take our entries from the order block, right? So now

that we've gone over those two pages in the Ebook in a little

further detail, what I'd like to do is head over to the

charts and go over a few examples here that weren't in

the eBook so you can see it more practically, okay? So,

we're currently on Australian dollar, US dollar on the

one-hour time frame. Now, I'm not going to use the replay

tool and you know, set trade parameters and all that kind of

stuff. This video is more so about being able to train your

eyes to spot these things in the market. You need to be able

to spot the imbalance until it it becomes second nature to you

okay? So there's a few things I can see right off the bat. Now

I didn't cherry pick these. I'm just looking at the chart in

front of me. And I see plenty of imbalance but there's a few

that I'd like to go over that are really good examples. So

let's start from here okay we have a clear order block there

clear order block right here this candle here it created

significant imbalance because look at all that volume that

pushed into the market right after that small buy candle it

created a lot of imbalance I'm going to mark this out shortly

and it eventually broke substructure and you know this

this order block here it led to this whole move right which

broke more substructure more structure more it was

responsible for for a lot of disruption in the market okay

so let's just quickly highlight that order block

Let's just label it. One hour OB. Okay. Now I'm going to use

the Fibonacci tool to highlight the imbalance here. Okay. This

right here is the imbalance. You know what? Let me hide the

auto block for one second just so you can more clearly see the

imbalance. So let me explain to you why this is imbalance. I

set the Fibonacci tool right at the lowest point of that last

buy candle before the destructive move and the bottom

of the Fibonacci tool. Keep in mind we don't trade based on

Fibonacci. I simply use the tool to map things out. So the

bottom of the Fibonacci tool is set at the highest point of the

next candle following this full body candle. Okay so here's the

thing price was trading high created a minor low went up a

little bit failed to break that dropped very impulsively and

once it did drop kind of bottomed out here traded a

little bit higher created that that minor high right there and

then dropped off again from there so you see how we made a

low point here and a high point here right everything in

between oops everything in between that is imbalance or

inefficiency okay that's inefficient price action

because there was no equilibrium between buyers and

sellers now if price created this huge candle and then this

candle here had enough momentum to continue higher and higher

and higher until it reached at least this mark here then there

would simply be no imbalance in the market that would be very

efficient price action okay there would be no gap anymore

but that's not what What happened is we we kind of

topped out here and then started dropping off once more.

So that leaves imbalance in the market and we know that at some

point price is going to have to correct this imbalance. Now

Let me delete that for a second. I'm going to bring back

the 1 hour order block so this is the order block we would be

targeting this for a short position right hypothetically

I'm not going to get too deep into you know positions here

but theoretically we'd be targeting this one hour order

block for a short position because there's bearish order

flow it broke structure to the downside multiple times this is

the order block okay now the imbalance is here

imbalance right in that zone right there so we know that

even though price is trading so much lower we know that at some

point theoretically it should come back to fill that

imbalance okay it starts to right around here obviously

we're we're moving up very correctively towards that zone

start to fill it here but then we make one last push fills the

imbalance completely and what do you know it reacts very

nicely to our one hour order block right it taps into the

one hour order block from from that point on we start trading

lower now if you were in a short position this would

obviously present a good amount of profit and of course we have

we would have lower time frame order blocks within that wick

as well price comes back up mitigates anything within that

wick and then really melts from there okay so this is just a

good example of how we can utilize the knowledge of

inefficient price action or imbalance to to build a case

behind our bias okay so we have a short bias here but the

confluence we can add up to to go with our short bias the more

confident we can be in our overall trade. Okay? Now even

even within this bullish leg here leading up to that point

we have imbalances there as well okay so Let me actually

quickly use the replay tool because this might be a better

visual.

Okay so you know what? Let me take it back a little bit

further to right here.

Okay so price reacted to something here probably far to

the left on a higher time frame reacted to a demand level there

started trading higher hasn't broken any structure yet

obviously we kind of topped out here created supply headed back

down created a low and then very impulsively took off to

the upside didn't break structure just yet with that

candle but shortly after it did break structure right there so

this is the important part where we have to locate our

imbalance okay Because we broke structure. Right? BOS breakup

structure. What was responsible for that breakup structure?

Well this order block was responsible for that that was

the last low volume point of interest sorry that was the

last it was the point of origin for this break of structure it

was the last low volume candle prior to the volume disrupting

the market and breaking structure right like I've said

in previous videos doesn't matter if it's bullish or

bearish what matters is that it's the low volume candle so

rather than setting our order block to this huge bearish

candle we can refine it down to the small bullish candle

doesn't matter if it's bullish or bearish okay so this is our

order block again let's label one hour OB, one hour order

block. Now this order block is even more valid than another

order block would be because it actually created imbalance. Now

I hope you can spot the imbalance based on what we went

over up here. The imbalance is we just move this away for a

second. It's the gap between this wick and this wick. Okay.

Now, there wouldn't be an imbalance if this wick right

here was able to trade down far enough and connect with this or

go past it but that's not what happened. There was a gap in

price. So, only buyers were in control, right? There's a gap

in price. There's no equilibrium. There's no balance

between buyers and sellers creating an imbalance, alright?

Let's put our order block back there.

Okay so we know that we have a valid order block here it broke

structure okay and we have imbalance here as well so that

creates a higher probability scenario that this order block

will be mitigated and continue bullish order flow from that

point on okay so we could certainly look at placing a

long position here and that's exactly what happens price taps

into the auto block clears the or sorry corrects the imbalance

slash inefficient price action clears that mitigates the order

block about 50% of the order block too which is nice and

then takes off from there okay look at that so that would have

been a beautiful long position as well and you could even you

know once you enter a long position here your targets

could be set at the 1 hour order block up here because we

also have good understanding that price should reach back to

that level because of the imbalance here okay so rather

than let me just map this out for you quickly so you

understand what I'm talking about set an entry at the open

of the order block for example stop loss just below now

instead of just simply targeting our profit for the

recent highs like this high here for example or even this

high here you know that would still present a good

opportunity 5% to that high you know just over five and 1/ 2%

to that high but we know there's imbalance here so it's

a very likely scenario that price is going to eventually

reach the order block up here right so we could target that

order block at least the the low of that order block now

that changes things into 8. 66 R rather than five R okay and

we already saw this previously but you know it's played out

anyways price does reach that order block okay from there

we'd be going short right because we you know we have a

valid block.

Stop loss just above. Target lows. You can target this low.

Right? So there's I'm not going to go through the whole

trade. That's not the point of this. But the point is we can

use imbalance and inefficiency. We can use our knowledge of

that to strengthen our bias for our order blocks okay. Locating

order blocks and breaks of structure. That's a whole

different thing. We've gone over that previously. But

imbalance is just another tool in the shed to use towards

strengthening our bias. And you can see how beautifully that

can be utilized right? We can take advantage of the market in

in completely different ways with complete confidence. By

utilizing this knowledge. Alright so I hope hope you guys

enjoyed this video. Um I hope it wasn't too long. I hope I

didn't ramble too much but you know I'm sure there was some

really good points that you guys can take away from this.

So yeah. We'll talk to you guys soon. Stay tuned for the next

one.