Short Term Imbalance Continuation

15 dic 2024

Short Term Imbalance Continuation

This indicator identifies short-term trading opportunities based on imbalance situations followed by consolidation.

Functionality:
The indicator looks for a specific candle formation:
1. An imbalance candle where the low is above the high of the following candle (bearish) or the high is below the low of the following candle (bullish)
2. Followed by 1-2 inside candles (close within the range of the previous candle) in the same direction

Theory:
The formation is based on two important market mechanisms:

1. Imbalance and Momentum:
- The imbalance shows a strong move with one-sided orderflow dominance
- Inside candles in the same direction confirm that the opposing side cannot take control

2. Consolidation Behavior:
- Inside candles are a classic consolidation pattern
- They show that the market is "digesting" the previous strong movement
- Consolidation within the range indicates controlled accumulation/distribution
- Particularly relevant when large market participants are building or expanding positions
- Consolidation at higher/lower levels confirms the dominance of the trend direction

Settings:
- Choice between one or two inside candles for different consolidation phases
- Option whether both inside candles must have the same direction
- Customizable colors for bullish and bearish signals

Application:
The indicator is particularly suitable for:
- Trend confirmation after strong movements
- Entry into pullbacks during trends
- Identification of continuation setups after consolidations
- Detection of accumulation/distribution phases of large market participants

Notes:
- Best used in combination with higher timeframe trend
- Particularly meaningful at important price zones
- Consolidation phases can indicate institutional interest
- The length of consolidation (one vs. two inside candles) can indicate different accumulation phases