Module 4 · Reading Imbalances
Diagonal Bid/Ask Imbalances
Why imbalances are compared diagonally — and the 3:1 ratio.
In this lesson you'll
- Understand why imbalance comparison is diagonal, not horizontal
- Define buy vs sell imbalance precisely
- Set a sensible ratio and minimum-volume filter
An imbalance flags a price level where one side dominated the other by a chosen ratio. The classic beginner mistake is to compare bid vs ask on the same row. The correct comparison is diagonal — one tick offset.
Setting the ratio and the volume filter
The ratio is configurable. Defaults differ by platform (some platforms default to 1.5:1 / 150%; many discretionary traders use 3:1 or 4:1 for higher-confidence prints). A higher ratio = fewer, stronger signals.
Key takeaways
- Imbalances are diagonal: ask(X) vs bid(X−1) for buys; bid(X) vs ask(X+1) for sells.
- Buy imbalance highlights the ask (green); sell imbalance highlights the bid (red).
- 3:1 is a common threshold; some platforms default to 1.5:1 — defaults vary, so know yours.
- Always add a minimum-volume filter so tiny illiquid prints don't count as imbalances.
Check your understanding
Pick an answer to reveal instant feedback. Answer every question to complete the lesson.
Why that's off: Same-row (horizontal) comparison is the classic mistake; the correct matchup is diagonal.
Why that's off: Comparing ask to ask isn't an imbalance calculation.
Why that's off: The POC is unrelated to the diagonal imbalance test.
Imbalances are diagonal. A buy imbalance compares the ask at X against the bid one tick below it, because buyers lift the offer at X while sellers would be hitting the bid one level down.
Why that's off: 300 ≥ 3×80 (=240) is true, so an imbalance exists; this option's logic is muddled.
Why that's off: Same-row comparison is the wrong (horizontal) method.
Why that's off: The imbalance test needs only the diagonal pair, not the POC.
Diagonal compare: ask(4500.50)=300 vs bid one tick below (4500.25)=80. 300/80 = 3.75 ≥ 3, so yes, it's a 3.75:1 buy imbalance.
Why that's off: It's about signal quality, not aesthetics.
Why that's off: It's a best practice you configure, not an exchange rule.
Why that's off: It has nothing to do with converting delta.
A ratio alone will flag a 4-vs-1 print as '4:1', which is noise. A minimum-volume threshold ensures only imbalances with real size behind them count.
Educational content only. Nothing here is financial or trading advice. Order-flow and options patterns shift probabilities; they never guarantee outcomes.