An imbalance is a region of price that traded in a fast, one-sided way, leaving an inefficiency the market is expected to return to and “rebalance” later. In smart-money and ICT trading the canonical imbalance is the fair value gap: a three-candle pattern where the first and third candles’ wicks do not overlap, leaving a band of prices the middle candle blew through without two-sided trade.
The reasoning is that healthy price delivery trades both sides of every level, so a gap represents unfinished business — orders that never got filled there. Traders mark imbalances as draw-on-liquidity targets and as reaction zones: price is expected to revisit the gap, often to its midpoint (consequent encroachment), before continuing. Buy-side and sell-side imbalances describe which direction the inefficient move ran.
Imbalance is a precise, mechanical idea at the three-candle level but vague beyond it — which gaps “count,” how much must fill, and when one is invalidated all vary by source. Displacement and imbalance go together (fast moves create gaps), and Secuora’s AI backtester includes an FVG primitive so a plain-English imbalance rule compiles to an exact definition. Definitions otherwise vary, so test the specific version you intend to trade.