DIFFERENCES IN FATIGUE PATTERNS & ABSORPTION
Although both absorption (the process of being taken in) and exhaustion (fatigue) indicate that price movement will slow down or reverse, they occur for very different reasons and market dynamics.
The main differences between the two can be seen from their causes, volume characteristics, and their behavior on order flow indicators such as Cumulative Volume Delta (CVD) and footprint charts:
1. Causes of Price Stalling
Absorption (Absorption): Happens when massive market aggression (market orders) is blocked and absorbed by massive passive liquidity (limit orders) from the opposing side
. Price cannot break through that level not because of insufficient effort, but because the resistance (order wall) is too strong
.
Exhaustion (Fatigue): Happens when the price movement loses its pure momentum due to the drying up of active participation from market participants
. Price stops moving because there are no longer new buyers or sellers willing to step in at those extreme price levels
.
In simple terms: Absorption stops price movement due to strong opposition, while exhaustion makes price stop on its own because interest runs out
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Although both absorption (the process of being taken in) and exhaustion (fatigue) indicate that price movement will slow down or reverse, they occur for very different reasons and market dynamics.
The main differences between the two can be seen from their causes, volume characteristics, and their behavior on order flow indicators such as Cumulative Volume Delta (CVD) and footprint charts:
1. Causes of Price Stalling
Absorption (Absorption): Happens when massive market aggression (market orders) is blocked and absorbed by massive passive liquidity (limit orders) from the opposing side
. Price cannot break through that level not because of insufficient effort, but because the resistance (order wall) is too strong
.
Exhaustion (Fatigue): Happens when the price movement loses its pure momentum due to the drying up of active participation from market participants
. Price stops moving because there are no longer new buyers or sellers willing to step in at those extreme price levels
.
In simple terms: Absorption stops price movement due to strong opposition, while exhaustion makes price stop on its own because interest runs out
#Write2Earn