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Lessons › Module 1: Auction Market Theory › Lesson 1.3

Lesson 1.3 · about 5 minutes

Balance vs. Imbalance

ObjectiveAfter this lesson you can tell whether a market is in balance or imbalance by comparing value areas across days.

Concept

Markets alternate between two states. In balance, buyers and sellers broadly agree on value. Price rotates back and forth inside a range, and day after day the Value Areas overlap. Probes to the edges of the range tend to be rejected. In imbalance, one side takes control because the old value no longer looks fair. Price moves directionally to find new value, and the new Value Area forms away from the old one, with little or no overlap. Which state are we in? That is one of the first questions a profile reader asks.

Four daily profiles side by side. Days 1-3 have overlapping shaded value areas between 100 and 103; Day 4's value area is higher at 105-109. A B C D E F G H I J A B C D E F G I J A B C D F G I J B C I B C E G I D F Day 1 VA 101-103 POC 101 A B C D E G H I J A B D E F G H A B E F G B F G C D I J F F Day 2 VA 101-103 POC 101 A D F A B D E F G H J A B C D E F G H I J B C D E H I B C C Day 3 VA 100-102 POC 102 A A A A B A B C E B C D E F G H I J C D E F G H I J C D E G I D E I D Day 4 VA 105-109 POC 107 111 110 109 108 107 106 105 104 103 102 101 100 99 Day 2: F probes to 106, rejected XYZ (hypothetical): three balanced days, then imbalance Hypothetical data. Shaded = each day's Value Area; orange line = POC
XYZ (hypothetical): three balanced days, then imbalance. Hypothetical, synthetic data generated from code. Four daily profiles side by side. Days 1-3 have overlapping shaded value areas between 100 and 103; Day 4's value area is higher at 105-109.

Worked example

Hypothetical XYZ over four sessions. Day 1's Value Area is 101–103, Day 2's is 101–103 and Day 3's is 100–102. The Value Areas overlap and every price traded on those days stays within 99–106, which is balance. On Day 2, period F probed up to 106, but price came back into value. On Day 4, value forms at 105–109 (POC 107), entirely above Day 3's Value Area high of 102. With no overlap, the market has moved into imbalance to find higher value.

Key takeaway

Overlapping value means balance. Value moving away with no overlap means imbalance.

Check yourself

Pick an answer to see instantly why it is right or wrong.

Question 1 of 3

Days 1–3 have Value Areas of 101–103, 101–103 and 100–102. What state is the market in?

Question 2 of 3

Day 4's Value Area is 105–109 and Day 3's was 100–102. Which description is best?

Question 3 of 3

In a balanced market, what tends to happen when price probes the edge of the range?

Not financial advice. Educational content only, not financial advice. All tickers and prices are hypothetical, synthetic data. Market Profile is an organizing tool, not a trading system or a prediction. Trading involves substantial risk of loss.