Absorption Trading

Absorption vs. a level simply holding

A level that is merely holding is quiet: light volume, small candles, price drifting. Absorption is loud: big volume, price pinned in a two-or-three-tick band, candles with long wicks and small bodies. The difference matters, because only absorption gives you a reason to take the other side.

The tells

• Volume per bar spikes to two or three times the recent average while range per bar collapses.
• Repeated pushes into the level each fail to make a new extreme by more than a tick.
• Offers keep refreshing at the same price instead of being repriced away.
• When it breaks, it breaks the other way — fast, because the aggressive side is now trapped.

Trading it

1. Context: a defined level (VWAP, prior-day extreme, balance edge) with a visible volume spike and no price progress.
2. Entry trigger: the first candle that closes away from the level in the direction of the absorbing side, after at least two failed pushes. Two failed pushes is the minimum — one is noise.
3. Stop: hard disaster stop a few ticks beyond the absorption extreme. This setup gives you the tightest stop of any reversal pattern, which is exactly why it is worth waiting for.
4. Target: VWAP if you entered away from it, otherwise the opposite balance edge. First scale at 1R.
5. Risk sizing: 1% of account. The tight stop means you can carry normal size — resist the urge to oversize because "the stop is small."
6. Invalidation: the level gives way and price trades through with volume continuing to build. The absorber got run over — that happens, and you are out on the first close beyond the level.

The trap

Absorption that fails produces the fastest moves on the board, because everyone who read it correctly is now on the wrong side. Never add to an absorption trade that is going against you. Take the loss at the level and re-read.