An Order Flow Imbalance Oscillator from Unresolved Supply and Demand Zones

Summary

The indicator estimates which side has more unconsumed volume stored in surviving supply and demand zones. It identifies a zone after three consecutive candles in one direction when at least one has volume above its rolling average, then anchors the zone to a nearby candle of the opposite direction. Zone height scales with a long-period ATR, and the oscillator compares the absolute accumulated volume assigned to live demand and supply zones. Its bounded reading changes in steps when zones are created or invalidated, rather than moving smoothly with each bar.

The document describes zone invalidation, overlap removal, a per-side zone cap, and a cooldown to limit repeated signals during a run. It proposes using the sign as a market context filter, watching steps for changes in inventory, and comparing price swings with oscillator behavior. Synthetic-series checks report that extreme readings and oscillator changes are not rare, but these are not live-market performance tests. The method depends on reliable volume and adequate chart history; its high-volume filter can behave differently on short timeframes, and no profitability evidence is given.

Key ideas

• The oscillator compares volume accumulated in surviving demand and supply zones.
• Zones are triggered by three same-direction candles, including at least one above-average-volume bar.
• Zone invalidation, overlap cleanup, a five-zone cap, and a cooldown shape the indicator's stepwise readings.
• The sign can serve as a directional context filter, while changes reflect zones being added or removed.
• The method requires dependable volume data and substantial history, and the document does not establish trading profitability.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.