Order FlowIntermediate
Imbalances & Stacked Imbalances
Diagonal bid/ask ratios and what a stack of them means.
An imbalance is where one side of the book is far more aggressive than the other at a price — commonly a 3:1 or greater ratio between the ask at one level and the bid at the level below (a diagonal comparison).
Footprint imbalances are measured diagonally because a buy at one price competes with a sell at the price just below it. A single imbalance is noise; what matters is when several line up:
- Stacked buy imbalances — several bullish imbalances in a row mark a zone of initiative buying and a potential support shelf.
- Stacked sell imbalances — the mirror image; a supply shelf.
- Unfinished business — imbalances at the extreme of a move often get revisited.
Imbalances shine at breakouts: a move out of a range backed by stacked imbalances is far more trustworthy than one on thin, balanced volume.
This is exactly the confirmation the AlgoPloy blog describes for Initial Balance breakouts — use stacked imbalances and absorption to tell a real break from a false one.