Supply and demand imbalance

A supply and demand imbalance is a state where one side of the market has noticeably more orders than the other, which pushes price sharply toward the heavier side. When buyers dominate, price rises; when sellers dominate, it falls. The zones where this dominance was strongest remain on the chart as supply and demand areas.

In practice a strong imbalance leaves a trace as an imbalance (FVG) and forms order blocks — the zones from which one side's dominance began. A demand area is where buyers sharply lifted price; a supply area is where sellers pushed it down. This is why a supply and demand imbalance is closely tied to the ideas of zone of interest and liquidity: price returns to where balance was broken in order to restore it.

In our method a supply and demand imbalance is the foundation that explains price movement: supply and demand set direction, while structure and ranges help read where the dominance has already been worked off and where it is still in play. The Trade Model indicator maps these zones on the chart.