Order Imbalance
Market Microstructure glossary · Adverse Selection & Information Asymmetry
Definition
The difference between total buy-side and sell-side order quantity. Positive imbalances (excess buys) predict positive returns; negative imbalances predict negative returns.
Order Imbalance in plain English
At any moment, add up all the shares people want to buy and all the shares people want to sell — the gap between them is the order imbalance. If buyers vastly outnumber sellers (a positive imbalance), that hunger tends to push the price UP soon after; if sellers dominate (negative imbalance), the price tends to drift DOWN. It's basic supply and demand made measurable: like a concert where way more people want tickets than there are seats, so you know the price is about to climb. Traders watch imbalances because they're an early hint of which way the price is leaning.
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