Absorption flags bars where volume is large but the price range stayed small. Interpretation: liquidity providers absorbed the incoming aggressive flow. Often a precursor to a reversal.
Shape
{ "type": "absorption" }No params (uses engine defaults for the volume-vs-range threshold).
Usage
- Reversal cue at structure: absorption at a supply or demand zone is a stronger signal than absorption mid-range.
- Pair with trend filter to fade against the prevailing trend only when absorption appears at extremes.
Pitfalls
- Order-flow data is patchy across exchanges. Absorption is most reliable on venues with tape data; spot crypto without trade reporting can miss the signal.
- One bar of absorption isn't a strategy. Use it as one of several confirmations.