Trading concept- Absorption of Demand
Myth: If the price approaches a level repeatedly, and gets rejected from it, this means that the level is very strong.
Reality: After each touch, the level becomes weaker and weaker due to the absorption of the residual orders.
Underlying logic:
1. Whenever the price keeps approaching a certain level, there are pending buy orders which are waiting to be filled.
2. Every time the price comes back to this level, a certain amount of orders gets absorbed.
3. More the price approaches that level, the lesser unfilled order remains.
4. Hence, ultimately all the orders get absorbed and we see a breakout/breakdown of that level.
Disclaimer: This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Happy learning. Cheers!
johntradingwick
Reality: After each touch, the level becomes weaker and weaker due to the absorption of the residual orders.
Underlying logic:
1. Whenever the price keeps approaching a certain level, there are pending buy orders which are waiting to be filled.
2. Every time the price comes back to this level, a certain amount of orders gets absorbed.
3. More the price approaches that level, the lesser unfilled order remains.
4. Hence, ultimately all the orders get absorbed and we see a breakout/breakdown of that level.
Disclaimer: This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Happy learning. Cheers!
johntradingwick
Rajat Kumar Singh,
B.Tech (Delhi Technological University)
Global Community Manager, TradingView
✅ Telegram: t.me/johntradingwick
✅ Blog: tradingwick.in/
✅ Amorella: amorella.in/
B.Tech (Delhi Technological University)
Global Community Manager, TradingView
✅ Telegram: t.me/johntradingwick
✅ Blog: tradingwick.in/
✅ Amorella: amorella.in/
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