IMBALANCE // FAIR VALUE GAP // INEFFICIENCY

When we're looking at efficient price action, what we would see is a series of three candles. You would see an up move that creates a high another candle in the center and a third candle and essentially a basic explanation is the high of the first candle needs to meet the low of the third candle to be classified as efficient price action. What this means essentially is when price is moving up both buyers and sellers had a fair chance at access to liquidity to continue the move, because for every buy order there needs to be a sell order. On the other end and for every sell order there needs to be a buy on the other end.

Now we're looking at inefficient price action.

We can see that price, the high and the low of the third candle do not actually meet, which means this candle was pure selling power that ultimately created the move. And what that means is price is more than likely going to have to come back to this inefficient area of pricing to fill any liquidity that was skipped. If we're looking at a up move, it's the same concept.

We're looking at the low of candle one and the high of candle three. These candles should meet in order to balance the Pricing and make pricing efficient, whereas an inefficient price action will see the low end. The high of the third candle do not meet, which means price skip through any potential buying and we're just offering sells from a volatility or liquidity standpoint. There was just too many selling positions here that made price move too rapidly to efficiently offer both buying and selling to occur. And again price will more than likely gravitate back to these areas to balance pricing and liquidity.

We generally will stick to the higher time frames when looking at imbalance in prices - 1 hour and higher. This provides the best range, whereas if you use a lower time frame imbalance, it may only be few points, which isn't overly helpful.

One thing to note is that imbalance is more of an additional confluence and reference point of where price may revisit. If you spot imbalance on the 1 hour, for example, and you drill down low enough you're likely to see efficient price action overall.

That being said you will also see correlating inefficiency in some cases which can be a strong indication of where price is going to revisit if it corelates with a higher timeframe point of imbalance.

NJAT : Inefficiency

• Inefficient Pricing > the market has to stay balanced, for every buy there has to be a sell and vice versa. When we see only buying or pure selling this creates voids in price that the Central banking algorithm has to fill voids to make price-efficient again