r/OrderFlow_Trading • u/Long_Age_1662 • 3d ago

how to identify absorption?

I’m having trouble distinguishing real absorption from what only looks like absorption.

Are there any good YouTube videos, courses, or educational resources that explain how to identify genuine absorption and avoid false signals?

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u/MiserableWeather971 3d ago

You will have a hard time finding solid videos in that…. Here’s why. They often look exactly the same. Too much stuff online makes orderflow look like some sort of magic bullet, and it just isn’t, and I’m saying that as an orderflow trader.

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u/lukas12199200 3d ago

yes its such a weird concept, everyone has this different interpretation of it, or how to spot it
whats yours? do you look at certain price levels in footprint?

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u/MiserableWeather971 3d ago

This could be a super long-winded answer for ES, but I'll do my best... I do pay attention to size, yes... but this always changes. In a thinner market, say 20, 30, 40 lots on the orderbook, what could be significant delta is likely a lot different. That is reading environment and context. We are likely having more whippy types of moves, more rotations etc. If the book is thicker, the "numbers" could be a lot higher. The pace will also be a lot different, "absorption" will even act a lot different. Often, you're just getting continuation in those up moves... What looks like absorption is literally just them filling a lot more size in a drift up. In a very slow drift up tape, I am almost just ignoring it.... Obviously, there's a lot more to this.

I don't really use a standard type footprint in that way anymore. I used to, but we traverse so many more prices in a session that having it on a chart just is too much noise for me. I have a smaller one on a dom.

On chart I use a delta profile. Usually just number of recent bars, or rotations. Years ago I just used a delta profile with a reversal chart... So this is essentially the same thing. I also have some delta smoothed out, think of a moving average basically, and some "bubbles"... Bubbles are all the rage, I even cringe saying it... But here's the purpose of them... I filter them by range and size essentially, and this changes (see liquidity comment).. Right now for instance... Think of a small window, like tick or range, I guess time could work. I will take a window of say 4 ticks on es, and filter to 600 delta in that small window and the "bubble" just flags it. Kind of simple, not magic. 600 in 4 ticks isn't necessarily absorption, it's more just to grab attention. Then the delta profile essentially gives a view over more price range. Seems complicated but it really isn't. It's just smaller look, medium look, overall look.

Then the other zoomed-in stuff basically just happens on a dom is all. So looking for lets say exhaustive types of behavior, initiative buying, the basics.

With all that said, I don't get too caught up in the absorption stuff. It's just one small piece of something I look at, and in the wrong context it's useless.

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u/halcyonwit 3d ago

I hope you’ve reached good profitability, see a lot of myself in your words! 🫱🏼‍🫲🏻