Imbalance labels: define, test, invalidate

Prerequisite: Complete structure and liquidity lessons.

Original English written learning is available here. Real clean ATAS captures/continuous replays and independent review are not complete. Hypothetical examples are not trading records.

A chart pattern is not an account of missing orders

Some ICT/SMC material calls a three-candle non-overlap a fair value gap. The phrase is trader vocabulary. It does not establish fundamental fair value, a literal absence of every trade, or an institutional obligation to return. Different chart intervals can create or remove the pattern.

For this lesson only, define an upward three-bar non-overlap as: the third bar's low is above the first bar's high. Use three completed bars from the same contract and interval. The space between those two prices is a study zone. It is not automatically a support signal, target or free-money opportunity.

Worked hypothetical example

Bar A high = 300.00. Bar B rises strongly. Bar C low = 301.50. On this chart the non-overlap zone is 300.00–301.50, width 1.50 points. The middle bar may have traded throughout that price range; calling the zone “no trades occurred” would therefore be wrong.

A later return to 301.00 enters the zone but does not fill it completely. For this exercise define a full traversal as price reaching 300.00 or below after zone creation. Separate that from invalidation: for a provisional hold-above hypothesis, choose a completed close below 300.00 as the invalidation. A full traversal and a closed invalidation are different events under these definitions.

Keep the sample honest

Do not collect only zones followed by rallies. Log every qualifying pattern under the same rule, including immediate failures and zones never revisited. Freeze interval and definitions. A fair test needs prespecified outcomes, a price-only comparison, out-of-sample sessions and realistic costs if any strategy is later proposed. This lesson itself supplies no evidence of net predictive advantage.

Avoid introducing an “order block” label as proof of a large participant's inventory. A candle location is not a disclosure of who bought it. If using any such label in later study, define it operationally and separately record what would make it fail.

Practice · 4 points

A high is 410.25 and C low is 411.00. A later bar's low is 410.50 and its close is 410.75. 1. Is the defined zone present, and how wide is it? 2. Was it fully traversed? 3. Has the lab's close-below-lower-edge invalidation occurred? 4. Why is “price must fill the gap” unjustified?

Reasoned answer key

1. Yes, 410.25–411.00, width 0.75 points (1). 2. No: 410.50 did not reach 410.25 (1). 3. No: close 410.75 is above 410.25 (1). 4. A chart definition is not a causal or empirically established obligation; patterns can remain unvisited (1).

Ready: 4/4 and you can distinguish pattern creation, partial entry, traversal and invalidation. No real chart screenshot is supplied; fresh clean ATAS capture is pending.

Education only. Futures involve substantial loss risk. No profit, pass rate or institutional intent is established by these examples. No signup, evaluation purchase or paid feed is required.

Next in the recommended reading order: Read price before delta