Net Imbalance
Category: Structure
Formula
Net Imbalance = Σ (D_k - S_k) for all visible buckets k
The aggregate signed difference between total demand and total supply across the visible depth window.
Intuition
Net imbalance is the single-number summary of the entire book: does more liquidity favor buying or selling? It collapses the full depth profile into one directional reading. A large positive net imbalance means the book is structurally stacked toward demand. It does not mean price will move — it means the structural permission favors that direction.
What It Answers
What is the aggregate directional pressure?
Whether the total resting liquidity across the visible book favors demand or supply, and by how much (in USD).
Visual Representation
- Panel: Ratio Price chart — NET IMBALANCE subpanel (below the ratio price line)
- Display: Continuous area chart showing net imbalance over time
- Color: Positive fill (demand > supply) in teal/green, negative fill (supply > demand) in orange/red
- Context: Selected via
priceContextPrimitivesetting in the price context panel
Behavioral Interpretation
| Condition | Interpretation |
|---|---|
| IF net imbalance positive | THEN aggregate book favors demand — structural tailwind for ratio to rise |
| IF net imbalance negative | THEN aggregate book favors supply — structural tailwind for ratio to fall |
| IF net imbalance trending positive | THEN demand building over time — structural momentum accumulating |
| IF net imbalance flipping sign repeatedly | THEN contested market — no dominant structural side |
| IF net imbalance large but displacement flat | THEN book is positioned but flow has not arrived — potential energy without kinetic trigger |
Failure Modes
- Far-field dominance: A large positive net imbalance might be driven entirely by thick demand at 1–2% from mid, while near-mid is supply-heavy. The aggregate masks the near-mid reality. Always check Log(A/B) for the per-bucket breakdown.
- Depth regime changes: Net imbalance can shift rapidly when large orders are placed or pulled. A single large resting order far from mid can dominate the aggregate without affecting near-mid dynamics.
- Normalization dependency: In absolute USD terms, higher-cap pairs naturally have larger imbalance numbers. The magnitude is most meaningful when compared over time for the same pair, not across different pairs.
Interactions
With Log(A/B) Depth: Net imbalance is the aggregate; Log(A/B) is the spatial breakdown. They answer the same question at different resolutions. Use net imbalance for the quick read, Log(A/B) for the detailed map.
With Centroid: Net imbalance tells you how much. Centroid tells you where. A positive net imbalance with a near-mid centroid means the pressure is immediate. The same net imbalance with a far centroid means the pressure is latent.
With Trade Flow: Net imbalance (structure) vs trade flow (participation). If both agree (positive imbalance + aggressive buying), the move is structurally supported. If they conflict, one is likely to capitulate.
With Displacement: Rising displacement with rising net imbalance = structural confirmation. Rising displacement with falling net imbalance = the book is not supporting the price move — fragile extension.