Window of Imbalance (Fair Value Gap)
A price gap between candle wicks where one side overwhelmed the other, leaving an inefficiency that price tends to revisit — used as context, not a direct entry signal
A window of imbalance forms when three consecutive candles create a gap between the first and third candle's wicks. The middle candle moved so aggressively that there was no two-way auction. This gap represents unfilled orders and incomplete price discovery. While price tends to revisit these windows, trading directly from them is unreliable — the extreme might not get hit, and in strong trends price can slice right through. Instead, use windows of imbalance as context: they confirm zone quality (zones with imbalance have more institutional conviction), help gauge move speed (large windows = aggressive moves), and map potential reaction areas during pullbacks. A supply or demand zone that contains a window of imbalance is stronger than one without it. But the entry should come from structural confirmation (CHoCH/BOS in the zone), not from the window itself.
✓How to Recognize
- •Use imbalance as a zone quality indicator — zones with imbalance show institutional conviction
- •Windows help gauge displacement: large gap = aggressive institutional interest
- •Map imbalance windows as potential reaction areas during pullbacks for trade management
- •Multiple stacked windows indicate very strong directional conviction
⚡How to Avoid
- →Placing limit orders directly at the window of imbalance — the extreme might never get hit
- →Treating every window as a reversal zone — in trends, windows get filled and price continues
- →Ignoring which window to trade when multiple are stacked — use the one with HTF zone confluence
- →Using imbalance as your primary entry signal instead of structural confirmation