5.3. Imbalance Indicators
Imbalance Indicators Application
The Imbalance Indicators are located on the top right part of the chart. They display the Order Book Imbalance and the Volume Imbalance.
Order Book imbalance represents the ratio between the average bid order book size versus the average ask order book size. The ratio is calculated as:
๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐กa๐๐๐ ๐๐ข๐ฆ ๐๐๐๐๐๐ โ ๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐ก๐๐๐๐ ๐ ๐๐๐ ๐๐๐๐๐๐
๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐กa๐๐๐ ๐๐ข๐ฆ ๐๐๐๐๐๐ + ๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐ก๐๐๐๐ ๐ ๐๐๐ ๐๐๐๐๐๐
Volume imbalance represents the ratio between the volume generated by buying aggressors (market order transactions on the offer) versus the volume generated by selling aggressors (market order transactions on the bid). The ratio is calculated as:
๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐กa๐๐๐ ๐๐ข๐ฆ ๐ฃ๐๐๐ข๐๐ โ ๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐ก๐๐๐๐ ๐ ๐๐๐ ๐ฃ๐๐๐ข๐๐
๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐กa๐๐๐ ๐๐ข๐ฆ ๐ฃ๐๐๐ข๐๐ + ๐๐ข๐๐๐๐ ๐๐ ๐๐๐๐๐ข๐๐ก๐๐๐๐ ๐ ๐๐๐ ๐ฃ๐๐๐ข๐๐
The two imbalance indicators are calculated according to the current chart range. Any change to the chart range (either by dragging or by zooming in or out) will affect the readings of the imbalance indicators.
Imbalance Indicators Interpretation
Users can gauge the imbalance indicators to assess when the activity is heavily titled to a single direction based on the order book and order flow activity. This can help in assessing momentum moves or exhaustion points.
Imbalance Indicators Settings
The Imbalance Indicator Ratios are displayed on the top right side of the chart. Whenever an Imbalance Ratio is equal to or greater than 10%, the number will appear in the colour set for the buyers. If the Imbalance Ratio is equal or less than -10%, the number will appear in the colour set for the sellers.
See Colour Settings for details on changing the colour setup.
To enable the Imbalance Indicator Display, click the studies panel icon above the chart and check either of the two imbalance indicators.
The studies panel also includes settings for the Order Book imbalance as illustrated below.
Order Book Imbalance Settings
With Price range of imbalance computation you can set the number of price levels to use, whether as an absolute number or as a price percentage from the best bid and ask. You can also set it to include all available levels.
The Lower rate for farther levels allows you to set an exponential weight to the different price levels so that levels closer to the best bid and ask have more weight in the imbalance calculation. Just set the number of levels interval at which the weight assigned to the next interval of levels decreases by 50%.
Using a Sound Alert, you can set audible alert when imbalance reaches the percentage you configure.
Imbalance Indicators Limitations
The Imbalance Indicators are set to take into account the entire visible range of the chart. To change the time range taken into account when calculating the imbalance ratios, users must zoom in or out or drag the chart.