Example of how Imbalance creates trends and balance creates ranges

Market fundamentals

Let's talk a bit about market fundamentals. If you want to survive and obtain ongoing success in trading, you'd better rely on fundamental principles that don't change not setups. There are bunch of setups over there, candlestick configurations and other stuff.

But if you know principles, you will be more flexible and your success will be more solid

What you can rely on trading markets?

1. Imbalance creates trends, balance creates trading ranges

Yes, exactly this sequence. Not "trend is your friend", but imbalance is your friend, because trend is an outcome, imbalance is a market condition that creates this outcome.

"Trend-oriented" mindset often pushes traders seek for bad trade locations, when opportunity no longer exists. Imbalance is what you really need.

Though trading is not a science, it has some unwritten laws beyond price action:

First - big market participants create trends and rely on fundamental analysis. Biggest players don't rely on charts in decision making process.

They have charts for just one thing - to know how crowd thinks and where majority will step in the markets. Big players need "hot spots" on the market (when many traders are in) to have liquidity. Their positions require liquidity and without liquidity they will be unable to accumulate enough volume for their positions.

Imagine player with pip size equal to 100.000 USD or higher. Of course, he will need liquidity and will build his position long enough.

That's why they monitor charts to know when traders will step in. But the reason they need to build a position is not techical analysis. Reason is fundamental analysis and analysis of real supply and demand.

It's hard to spot "big playesr"

One thing will help you. Address yourself a question - who loses on the market? Who is caught in short or long positions? If you understand that long players are losing, you automatically know that bigger timeframe short player opposes them. Smart money players create imbalance and absorb volumes.

Who provides liquidity, who consumes it? Like Warren Buffet said - if you find yourself near the poker table and don't know who loses money - it's you who loses it.

2. Keep an eye on hot spots in the market

What is a hot spot? They are: important extremums, round numbers, option barriers, in a nutshell - spots that traders are watching. If you know that volumes are there, big guys are also there.

Every trend can be divided into several parts - young trend, mature trend and culmination.

Young trend and culminational phase represent great imbalance but with one nuance - big players are building positions in young trend, and covering their positions during culmination.

If you see "obvious" trend and see very hot market, be aware - avoid being a laggard.