Absorption and exhaustion

What it is

Absorption is a stall on high volume. Aggressive sellers keep hitting the bid near a low, volume is unusually heavy, but price doesn't go lower, because large passive buy orders are soaking it up. It's Wyckoff's 'effort versus result': a lot of effort, no result. Traders who sold into it are then trapped if price turns.

Exhaustion is a stall on low volume. The aggressive side simply runs out: volume thins as price pushes to the extreme, and the last bars show few or no trades on the aggressive side (an 'exhaustion print').

Both are read on footprints or with volume and delta, so they need real exchange data; on spot forex they can't be seen directly.

How to spot it

• Absorption: very high volume and strong negative delta at a low, with little or no new low.
• Exhaustion: shrinking volume into the extreme, and thin or zero prints at the high or low of the last bars.

How to use it

• At a planned support level, absorption is a reason to look for longs once price turns up.
• Exhaustion at the end of a stretched move is a reason to take profit or wait for a reversal setup.

Common mistakes

• Calling any high-volume bar absorption; it needs price to stall at a level.
• Fading a strong trend on one sign of exhaustion.

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