Do you want to know what is a trade imbalance in forex? An imbalance in the forex market refers to the market condition when there is an imbalance between buyers and sellers, which means there are many orders of one kind: buy or sell. It implies that there are insufficient counterpoint orders.
Types of Imbalance
There are two types of imbalances:
1. Valleys and peaks
2. Continuation pattern
Valleys and Peaks
This type of imbalance occurs when the price trend reverses in the opposite direction. These patterns are strong and it is followed by price. It is further broken down into two groups:
Drop-Base-Rally:
The price moves down in this structure, which means it drops, waits a while to form a base structure, and then rises (which means it goes up). It is explained in the chart below.
Rally-Base-Drop:
The price moves up in this structure, waits a while for a base structure to form, and then moves down to show a significant price drop. It is further elaborated in the chart below.
Continuation Patterns
This type of imbalance occurs when the price tends to move either up to down or down to up. The patterns here are shaky. It is further broken down into two groups:
Drop-Base-Drop:
The price falls, pauses for a while to build a base, and then continues to fall strongly in this structure. It is explained in the chart below:
Rally-Base-Rally:
The price rises pause for a while to establish a base and then continue to rise in this structure. It is elaborated in the chart below.
