ICT Volume Imbalance

The ICT Volume Imbalance indicator automatically identifies and visualizes market inefficiencies where significant trade volume disparities occur between consecutive candlesticks.

Usage

The Usage section focuses on how to interpret volume imbalances as potential reversal or continuation points based on institutional activity.

• Bullish Volume Imbalances: These occur when price moves upward with a volume surge that exceeds the previous bar's volume by a user-defined threshold. These areas are highlighted with a green box (by default) and suggest a shift in buying demand.
• Bearish Volume Imbalances: These occur when price drops significantly with higher relative volume, indicating large players may be offloading positions. These are highlighted with a red box (by default).
• Active vs. Closed Zones: The tool dynamically manages these zones. An "Open" box extends to the right, serving as a potential future support or resistance level. Once price trades back into and "fills" the imbalance, the box color shifts and stops extending, signifying the inefficiency has been mitigated.

Details

This tool is based on Inner Circle Trader (ICT) concepts regarding Volume Imbalances (VI). Unlike a standard Fair Value Gap (FVG) which looks at price gaps between three candles, a Volume Imbalance focuses on the overlap (or lack thereof) between the bodies of two consecutive candles coupled with a volume expansion.

The logic checks two primary conditions:

1. Price Displacement: For bullish VI, the current candle's body must be entirely above the previous candle's body. For bearish VI, it must be entirely below.
2. Volume Confirmation: The volume of the current candle must exceed the volume of the preceding candle by a specific multiplier (Volume Threshold).

Settings

Inputs

• Lookback Period: Sets the number of bars the script scans to maintain active boxes on the chart (range 50-500).
• Volume Threshold: A multiplier used to detect volume breakouts. A value of 1.1 means the current volume must be at least 110% of the previous bar's volume.
• Right Offset: Determines how many bars into the future the active imbalance boxes extend.
• Allow Wick Overlap: If enabled, the script will detect imbalances even if the wicks of the candles touch, focusing only on the gap between candle bodies.

Volume Imbalances (VI)

• Bullish/Bearish Open VI Color: Sets the background color for active imbalances that have not yet been filled by price.
• Bullish/Bearish Closed VI Color: Sets the background color for imbalances that have been mitigated/filled.
• Border Color/Width: Customizes the visual outline of the imbalance boxes for better chart clarity.

FAQ

How do I access ICT Volume Imbalance?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What is the difference between a Volume Imbalance and an FVG?

An FVG is a three-candle sequence where a gap exists between the wicks of the first and third candle. A Volume Imbalance specifically looks at the gap between the bodies of two consecutive candles and requires a volume expansion.

Can I change the sensitivity of the detections?

Yes, by adjusting the "Volume Threshold" setting. Increasing this value will result in fewer, more significant imbalances being detected, while lowering it toward 1.0 will show more frequent imbalances.