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Absorption

Absorption occurs when substantial aggressive buying or selling is met by enough opposing liquidity that price makes relatively limited progress.

Why it matters to you

Imagine aggressive sellers repeatedly hit the bid, but price stops falling. Someone on the other side is accepting that selling. That can indicate sell side absorption. Likewise, aggressive buying that fails to push price higher may indicate buy side absorption. Absorption can help traders identify areas where aggressive order flow is meeting strong opposing interest.

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