Absorption Pro

Markets move because of imbalances in supply and demand. Traders with sufficient buying or selling power to move the market are likely well-informed and/or have commercial objectives to their trading aside from short-term speculation. They cannot fulfil these trading objectives by simply entering the market using market orders. Their large positions are accumulated or distributed over time and by looking for absorption of market orders we can get a sense of where the supply and demand of larger traders is positioned in order that we can align our own trading to it.

Absorption Pro identifies various absorption conditions:

• Absorption at price extremes: this helps us identify short term market edges
• Absorption across bars: whatever chart period we are looking at is of no concern to other traders. This method considers the volume trading at given prices irrespective of chart period and highlights prices where large buying or selling is consistently occurring
• Trapped aggressive traders: identify when too many people have bought the extreme high or low and been caught by better informed traders with more buying or selling power
• Contested levels: see the price levels where large traders are battling against each other and understand which side won

These levels are identified in real-time. As well as seeing visual indications of the absorption price levels, the price level and order flow quality state are made available to your trading platform programatically to support alerts and automated trading.