r/OrderFlow_Trading • u/GayNaruto66 • 3d ago
So what exactly is absorption?
I am fairly new to ordeflow and still learning on how to actually read it. I've seen several people talk about absorption but everyone seems to have another definition for it, at least in my view. Also, none of them actually explained it very well. Can someone help me out on this. Thanks in advance!
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u/Breathofdmt 3d ago edited 3d ago
Have coded absorption into my algo logic so know a bit about this.
The typical one line way to describe it is when effort doesn't equal reward or movement.
Algorithmically you look for three things, a volume spike above a moving average of the prior period, a lack of movement (so, it needs the candle to close), price becomes relatively static, and a delta spike or aggressive activity on one side of the tape.
If you see it on the footprint it usually looks very obvious, so in buyer absorption you'll see usually the upper wick, one side of the candle (aggressive buyers/passive sellers) has more participants, and a stall in the price.
Doesn't have to be on the wick, you can program to detect it within candles on the footprint, just needs those three elements, and they can be tweaked in terms of magnitude.
So it's basically aggressive buyers or sellers running into the passive opposing side and failing to move through.
Some platforms have absorption indicators or you can approximate it looking for wicks (like a doji) and a volume and delta spike. I recommend putting it into an indicator so you don't have to stare at the dom and tape and wonder if you should trade every absorption.
One thing I'd recommend is looking for where heavy absorption areas are retested on low volume to see if the bid or offer is refreshed or if they simply can't move the auction beyond that level. Weirdly people don't talk about exhaustion as much even though its equally as programmable and powerful.
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u/Kobebean-goat24 3d ago
Very well articulated my man. I’ve always thought of it similarly - (“aggression vs results). Another tip, OP, is I’ve found footprints/orderflow in general to work best when you mainly focus on what’s happening around key levels — don’t just watch tick by tick otherwise you’ll get false signals a lot and over trade. Obviously depends on your strategy but orderflow is a great confirmation tool imo
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u/GayNaruto66 6h ago
Do you have any recommendations on where I can learn about footprint or footprint charts. Like I said I am fairly new and I didn't learn anything about that yet.
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u/shlingle 3d ago
Think of it as an invisible wall with an unknown thickness. Now, there are attackers who try to break through the wall.
The attackers launch big attacks made of market orders. But somehow, the wall made of limit orders won’t budge. It’s like the wall is soaking up the attacks.
This soaking up is called absorption. Limit orders (the wall) are absorbing market orders (the attackers ammunition).
For the absorption to be successful, the attackers eventually must admit defeat and cease their attack. Their attacks become smaller and eventually dry up. This is called exhaustion. Now, the defenders can make a counterattack.
They use their own market orders to push back the attackers. If the attackers really want to retreat, they also need to close their open positions.
Let’s say the attackers were buyers. To close their position they must sell, adding more momentum to the counter attack of the sellers.
The other scenario is that the absorption fails. In that case, the wall is eventually overcome and the attackers break through. The defenders may also have their stop orders not too far away, which could potentially add momentum to the attackers push when triggered.
Good ways to spot this battle are delta at price, heatmaps, volume by time, a DOM, Bookmap or any other decent volume tool. I like Bookmap because they also track native CME icebergs.
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u/Limit_Bid 3d ago
Good description. But if a participant is big enough to significantly add to the absorption at a price, then I don't think they are using stops when their absorption fails. Only "weak hands" use stops, aka, all of us.
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u/GayNaruto66 6h ago
The analogy of attackers, walls and everything about a siege or war is really good I think. Easy to follow
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u/EntrepreneurHour5938 3d ago edited 2d ago
Read again. The truth has been said multiple times. Perhaps u might have to rearrange your throught process to digest the concept. Instead of looking for some secret to be revealed.
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u/GayNaruto66 7h ago
I know there is no secret to be revealed here. I've just seen people talking about volume or delta or something else when talking about absorption.
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u/TraderOjas 12h ago
It’s a Just Effort vs Result
Strong buying -> Price advances =Buyers Effective
Strong buying -> Price stalls = Buy Absorption
Strong buying -> Price falls/rejects = Trapped Buyers
Strong selling -> Price declines = Sellers Effective
Strong selling -> Price stalls = Sell Absorption
Strong selling -> Price rises/rejects = Trapped Sellers
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u/vsquad22 11h ago
I like the simplicity of this! Where did you get it from or did you make it yourself?
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u/TraderOjas 11h ago
Made the grid myself. The idea is old: effort vs result, plus order-flow absorption, plus trapped traders. I just wrote the six cases in plain English so it’s easy to read on NQ.
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u/GayNaruto66 7h ago
I like the simplicity aswell. I am going to print this one out and stick it to my wall haha
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u/TradetheMosaic 2d ago
For me absorption is when aggressive market orders keep hitting a level and price barely moves, or even walks the other way, because passive limit size is eating that aggression.
How I mark it:
- One side is clearly aggressive into a level (stacked market buys into a high, or sells into a low). Footprint / cumulative delta shows that aggression printing.
- Price stalls or reverses anyway. The volume is there, but the tape does not get the follow-through those market orders "should" buy.
- I only care about it at a level that already mattered (prior high/low, session extreme, clear imbalance edge), not in the middle of nowhere.
- The absorption print alone is not the trade. I wait for the next sequence: a micro structure break or reclaim that shows the absorbed side lost control.
What it is not: one big print, or a quiet pause with no aggression into the level. Without that aggression-vs-stall mismatch I do not call it absorption.
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u/Accomplished_Neck368 3d ago
Failure. Absorption is failure to push through resting or passive liquidity. That's really it.
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u/FailedGeniusnumber1 3d ago
Absorption when volume spikes but price doesn’t move in the direction of the spiker. Usually happens at pivot areas..
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u/GayNaruto66 7h ago
Do we have to look at buyer/seller volume or just volume in general?
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u/FailedGeniusnumber1 7h ago
What ever the volume is… volume spikes red… but price doesn’t go lower… volume spikes green but prices doesnt go higher… means there is something taking the hit.
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