Imbalanced To Balanced To Imbalanced To Balanced clearly describes emini day trading with day trading software.
The e-mini market is always in either a Balanced condition or an Imbalanced condition.
If the market is currently Balanced, it is going to be moving in a sideways direction as a two sided auction process (or two sided trading) is presently occurring with both Buyers and Sellers in relative agreement about price range and your day trading software should show this.
If the market is Imbalanced it is going to be directional as a one sided auction (or one sided trading) is occurring. At this point in time there are either more Buyers than Sellers or more Sellers than Buyers depending on the direction of price. An Imbalanced market can also be viewed as a market that is developing prospectively. Prices will continue in its current direction until, ultimately, the market will once again reach a price level at which it returns to a Balanced condition. This point is reached at a Low Volume Node which clearly indicates a current lack of further participation by both Buyers and Sellers. The previous imbalance of Buyers to Sellers or Sellers to Buyers has now been resolved. Prices will now settle into and balance in a new accepted price range.
Once the market returns from Imbalance to Balanced, and a new accepted price range is finalized, the previously accepted price range will now become either support or resistance. Prices were accepted there before and market participants were comfortable with those prices. It is only natural that any return to those prices would be thoroughly explored once again by market participants and with all E mini Day Trading.
The market will always auction both correctly and smoothly unless the markets are in the process of digesting new information or reacting emotionally to some catastrophic event. Simply stated, the market is always either developing or distributing and this should be displayed with all day trading software.
Rarely will a market go from a one directional Imbalanced condition directly into a reversal without first attempting to explore a new Balanced area. This is not to say it cannot happen. A new piece of information or a catastrophic event can easily and clearly motivate the market to go from Balanced to Imbalanced with a corresponding departure of price from Balanced to Imbalanced. Should that piece of information or catastrophic event turn out to be false, it is only reasonable for the market to immediately retreat to a previous Balanced area which the market has previously proven to itself to be a comfortable area for trading (trading now absent the previous erroneous information or catastrophic event). In effect, the “non-event” was factored in and then immediately factored back out.
In the event of a catastrophic event, the wise Trader will not rely on the auction process until such time as the auction process catches up or stabilizes from the catastrophic event.
One could say that the market is distributing in all time frames and it develops within medium and long term time frames. When developing, the price range will be within the its high, low and Value Range for that balance. Once the market trades outside the high, low and Value Range for that balance, it is in a distribution phase and moving towards new prices outside of the development area.
Consider, in your mind, a 30 minute chart and a 5 minute chart all of the same market. A cursory review of either one of these charts will clearly show both distribution and developing modes, areas of Balance and Imbalance.
A review of a 30 minute chart would identify what appears to be several clearly Balanced areas on that chart. It would be simple enough to identify the time frame from that chart of any one of these clearly Balanced areas. If we were to now look at precisely the same time frame on the 1 minute chart we would see that that Balanced area of the 30 minute chart will have been actually made up of any number of smaller Balanced areas on the 1 minute chart. Traders know to look at various time frame charts of the same market looking to find multiple charts moving simultaneously, in the same direction and moving out of the currently accepted Price Range to act as confirmation of the departure of this market from Balanced to Imbalanced.
In both cases trade orders from both Buyers and Sellers are in Balance prior to the next Imbalanced move with all e mini day trading. Prices clearly cannot go in one direction perpetually while the market remains Balanced. When the market does go in one direction for an extended period of time it is creating excess highs or lows which may or may not lead to a departure from Balanced to Imbalance with your day trading software.