YT YouTube2Text

YouTube2Text → Transcripts → How Absorption Actually Works on a Footprint Chart

How Absorption Actually Works on a Footprint Chart — Transcript

by Christopher Creamer | Orderflow Trader · 3,226 words · 502 segments · language en · Watch on YouTube

Open in transcriber Summarize with AI Download SRT/VTT

Full transcript

0:00So, let's talk about absorption. Most
0:02traders can completely misunderstand
0:05absorption. They might see aggressive
0:07buying or selling on the footprint and
0:08immediately assume that price has to
0:10continue, but aggression alone does not
0:12move price. The real question is, did
0:15that aggression actually produce a
0:17result or produce price progression?
0:19Because sometimes the market can absorb
0:21massive buying or selling pressure and
0:23the market can barely move at all. And
0:25understanding that difference is one of
0:27the most important concepts in order
0:29flow trading or the concept of effort
0:31versus result. So, in this video, I'm
0:34going to break down what absorption
0:35actually is, how it works mechanically,
0:38and how it differs from exhaustion
0:40because sometimes traders get them
0:41confused. But most importantly, I'm
0:44going to talk about when absorption
0:46actually matters and when it could
0:47potentially just be noise. So, what's
0:49up? It's Thrax. We're back for another
0:51video. I think it is important to make a
0:54video about absorption because it's
0:56probably the first thing that many
0:57traders actually learn when they're
0:58first getting into order flow trading.
1:00And it's important to really understand
1:02absorption and how we need to be viewing
1:05it or looking at it when we're trying to
1:07use it for information or informational
1:10value when it comes to our trading. So,
1:13the first thing we need to understand is
1:15what absorption actually is and what it
1:18really means because at the most basic
1:21level, absorption is effort without
1:23result. And that's the key concept. You
1:26have aggressive market participants
1:28coming into the market, but price fails
1:30to continue in the direction of that
1:32aggression. For example, let's say that
1:35buyers are aggressively lifting the
1:36offer and we have positive delta
1:39expanding and there's heavy trading
1:41volume, but price can't continue higher.
1:44That can suggest that passive sellers
1:46are absorbing that buying pressure. And
1:48the opposite is true for sellers hitting
1:50the bid and the passive buyers. Now, one
1:52important thing, absorption itself is
1:55not some magical thing or this entry
1:59signal alone that you should just be
2:01blindly fading or taking a trade because
2:04you're witnessing it happening because
2:06absorption does not automatically
2:08guarantee a reversal. There can be pause
2:11before continuation. All it means is is
2:14that the aggressive side is no longer
2:16being rewarded for their aggression at
2:18that moment in time. But to truly
2:20understand absorption, we have to
2:22understand aggressive and passive
2:24partici pants. You need to understand
2:26the difference between aggressive and
2:28passive participants because aggressive
2:30participants are traders who are using
2:32market orders. They're crossing the
2:34spread because they want to get in
2:36immediately. It's when you click buy
2:37market or sell market. That aggression
2:39is what you're seeing on the footprint
2:41through delta or imbalances and executed
2:44volume. Passive participants are a
2:46little bit different. That's what you
2:47might see on like a heat map or on the
2:49DOM. They're sitting with resting limit
2:52orders and they're providing the
2:54liquidity to the market. And absorption
2:56happens when those passive participants
2:58are willing to absorb aggressive
3:00pressure without allowing price to
3:02continue meaningfully. Now, obviously,
3:04not all liquidity is visible. There can
3:07be hidden liquidity, there can be
3:09iceberg orders, and there can be things
3:11that are happening behind the scenes.
3:13But what matters to us as traders is the
3:16result and that's the entire idea behind
3:19effort versus result. So, when we're
3:21thinking about effort versus result,
3:23this is probably the most important
3:25section of this entire video and a lot
3:28of traders focus only on effort. They
3:31look at big delta, big volume, big
3:33imbalances, but they completely ignore
3:36the result. If buyers are extremely
3:38aggressive and price explodes higher,
3:41then that's initiative continuation.
3:43There was result for that effort. But if
3:45buyers are aggressive and volume expands
3:48or delta expands and price still can't
3:50continue, that's very different
3:52information that we have to take note of
3:54because that can be suggesting
3:56absorption when you have high effort and
3:58very low result. And this is where the
4:00idea of acceptance becomes important.
4:03Aggression alone does not move price
4:06sustainably. Price needs acceptance. The
4:09market needs to actually auction higher
4:11and higher and hold higher. If it can't,
4:13then that's information. So, when we're
4:15looking at things in terms of effort
4:17versus result, we're looking at how hard
4:20someone tried and what they got for it.
4:22And we're understanding that
4:23relationship. So, in the event where
4:25there is low effort, but there is a high
4:27result, there could be thin liquidity
4:28sitting there. There was a book sweep or
4:30price move easily because there was
4:32nothing in the way. Now, if we're seeing
4:34high effort, but we're also having high
4:36result, then we're looking at initiative
4:38continuation where the aggression is
4:40actually being rewarded and pressure is
4:42being converted into directional
4:44movement. Now, when it comes to
4:46exhaustion, if we're looking at low
4:48effort and low result, where we don't
4:51have any real participation, the auction
4:53is simply just running out of steam or
4:56running out of fuel, then we can be
4:57witnessing exhaustion. But, what we're
4:59focusing on here today is high effort
5:02with little to no result and that is
5:03absorption. You're seeing real pressure
5:05meeting passive liquidity and someone is
5:07actively defending the level. So, if we
5:10were to be looking at continuation
5:12versus absorption, you would see
5:14aggression, you would see displacement
5:16and acceptance in a continuation. In the
5:19event of absorption, you would have that
5:20same aggression, but we would begin to
5:22stall and potentially even reject and
5:24you would watch the pressure actually
5:26flip. Now, I do I do want to take some
5:28time and talk about exhaustion versus
5:30absorption because this is another area
5:33where traders confuse them with each
5:35other constantly. Absorption and
5:37exhaustion are not the same thing.
5:39Absorption means aggression is still
5:41present, but someone on the other side
5:44is actively absorbing all of that
5:46aggression. Exhaustion is actually
5:48different. Exhaustion is when
5:50participation itself starts to actually
5:52dry up. So, the move stalls because
5:54traders stop pushing, not necessarily
5:57because a passive participant is
5:58defending the level aggressively. So,
6:01absorption usually involves heavy
6:04participation, heavy interaction, and
6:07effort without continuation. Exhaustion
6:10usually involves declining
6:12participation, less aggression, and the
6:15move simply ran out of fuel, kind of
6:17what we mentioned earlier. But, it is
6:18important to note the difference between
6:20the two. And so, when we're looking for
6:22absorption, volume is a very big thing.
6:24We need to see a lot of participation,
6:26but just no result for that
6:27participation. Now, let's take a quick
6:29break to talk about the sponsor of this
6:31video, Prop Firm Match. If you trade
6:34prop firms, you already know how
6:35confusing it can get. There's different
6:37prop firms, there's different
6:38challenges, there's different rules, and
6:41a lot of conflicting information. Prop
6:43Firm Match simplifies all that by
6:45putting everything in one platform. They
6:47have comparison tools so you can compare
6:49prop firm side by side or even
6:51challenges side by side, where it even
6:53lays out all the rules for you to see.
6:55So, you know exactly what you're going
6:56to be spending your money on or what you
6:58should be buying before committing any
7:00of your money to anything. You can
7:01review the rules side by side and see
7:03which prop firms are actually popular by
7:05reading some of the reviews from other
7:07traders just like yourself. So, you
7:09don't have to go and spend any time
7:11digging through all these different
7:12websites. So, instead of guessing or
7:14hoping that you pick the right prop firm
7:16or the right challenge, you can make a
7:18decision with everything laid out in one
7:20place. If you want to use Prop Firm
7:21Match, there's a link in the description
7:23and in the pinned comment, and make sure
7:25to check out their exclusive offers so
7:27you get the best deal on any of these
7:29prop firms by using code match. Now,
7:31let's get back into the video. So, we're
7:33going to take a look at the charts in a
7:35second, but I just want to talk about
7:36how absorption actually appears on the
7:38footprint. We have to look at volume,
7:40delta, and price behavior, and we have
7:43to look for all of them together. Now,
7:45what you'll typically see in terms of
7:47absorption is you'll see heavy volume at
7:50a level, aggressive imbalances into the
7:52level, and price fails to expand. The
7:54reason why I have the POC in the
7:56candles, if you've ever watched how I
7:58trade, is because I'm looking to see
8:00where the POC is in relation to
8:03the candle and the body, meaning that if
8:06the POC remains near the rejection area
8:08or high up in the wick, well, that's
8:10important information. I'm looking at
8:12strong positive or negative delta, and
8:14I'm watching for repeated attempts to
8:16actually push through a key area, and if
8:18wicks are forming at this area,
8:21and we're not getting that continuation
8:22or that acceptance above the level, and
8:25if the next candle then fails to
8:27continue, then at that point, we can be
8:30witnessing absorption. We have to read
8:32the relationship between pressure and
8:34outcome. Now, this is really important.
8:37This is extremely important because
8:40absorption alone is not a trade signal.
8:43Why? Because absorption happens
8:46constantly throughout the chart. Even if
8:48you drop to like a 1-minute or whatever,
8:50if you try to trade every instance of
8:52absorption that you see, you're going to
8:55get destroyed, and a lot of the times,
8:57especially when we're chopping, you're
8:59going to see absorption happening at
9:00both ends, right? So, location matters,
9:04and location determines whether that
9:06absorption
9:08holds weight, and how we should be
9:10viewing it, and if we should be using it
9:12to take a trade, right? We look at
9:14things like did it happen at a prior
9:16high? Are we seeing absorption at a
9:18liquidity sweep or a higher time frame
9:21level or a session extreme or a gamma
9:23level? Or did it happen randomly in the
9:26middle of a balance? Because absorption
9:29in the middle of noise usually means
9:32nothing. It's usually just noise. But
9:34absorption at meaningful location after
9:37initiative activity expands into the
9:39level, that becomes information that's
9:42worth paying attention to. So, location,
9:44location, location is extremely
9:47important when we're watching for
9:49absorption, when we're watching for
9:50effort versus result. Now, like I said
9:53though, you know, when it comes to
9:55absorption, it doesn't guarantee a
9:57reversal, but why can absorption
9:59actually lead to a reversal? Absorption
10:02matters because it creates trapped
10:04participants and trapped participants
10:06can fuel the move in the opposite
10:07direction. So, let's say for example
10:10that we have a breakout attempt. We have
10:11aggressive buyers chasing it and passive
10:14sellers are absorbing all of that buying
10:16aggression. There's no acceptance above
10:18the level and late buyers are now
10:21trapped. They got in at the worst time
10:23possible and when the pressure flips
10:25lower, it may fuel the move in the
10:27opposite direction if they have to get
10:29out of their position because what do
10:30buyers need to do to get out of a
10:32position? Well, they need to sell and
10:34that ends up potentially fueling the
10:35move in the opposite direction. Now,
10:37just because we see absorption though,
10:39it doesn't mean that it's automatically
10:41going to be a reversal. So, we need to
10:43talk about what confirmation looks like
10:45after absorption. This is where newer
10:48order flow traders really mess up
10:50because they see absorption and then
10:52they immediately try and fade the move,
10:54but absorption itself is not the signal.
10:57Absorption is evidence. The confirmation
11:00is actually what comes after that
11:01absorption. Did the continuation fail?
11:04Did pressure actually begin to shift and
11:07did the breakout fail to gain
11:08acceptance? We're looking at things like
11:10delta. Did delta flip? Did sellers begin
11:12stepping in more aggressively after
11:14buyers stalled? And that sequence of
11:16events matters because absorption
11:19without confirmation can still lead to
11:22continuation. We can have pause before
11:24continuation. Strong initiative activity
11:26can still reassert itself and continue
11:29through the level. So, this is why it's
11:31really important that you you see
11:33absorption, sure, but you shouldn't just
11:36automatically fade it and try and take a
11:38reversal. You still need confirmation
11:40because there are a lot of times, if
11:42you're looking at absorption, that you
11:44can be watching absorption happen or a
11:46stall at a level before that initiative
11:49activity reengages and we push through
11:51that level with acceptance. So, just
11:53remember, absorption can still fail.
11:56It's not some magical thing. It's just
11:58information that we're watching and we
11:59have have to wait for confirmation
12:01because again, strong initiative
12:03activity can reassert itself and
12:06continue through the level. So, the way
12:08that we think about this in terms of a
12:10decision tree when we're watching the
12:12charts, we're watching order flow, is
12:14did price reach a meaningful location?
12:17If yes, then did aggression fail to
12:20produce a result? Did we see a lot of
12:21aggression heading into this level and
12:23we failed to actually continue with
12:25price progression? Then we need pressure
12:27to flip. If it did, then the trade idea
12:29is valid. If we see aggression failing
12:32to produce result, but we aren't seeing
12:34that pressure flip, then we have to wait
12:37because we don't want to try and step in
12:40front of a move that can potentially
12:42continue. Just because absorption is
12:44showing up on the chart does not mean
12:46that we're going to reverse. It's so
12:48important. I I I can't stress it enough
12:51because I see a lot of order flow
12:52traders who just look for absorption,
12:53oh, I see it, reversal. You shouldn't be
12:56doing that. You really shouldn't. And
12:58location is incredibly important because
13:00if this occurs in the middle of chop or
13:02balance with no meaningful location, the
13:04correct decision is usually just to sit
13:06out of it until we actually go a certain
13:08direction or get out of that area. Now,
13:10let's take a look at a real example on
13:12the chart because this is where the
13:13concept usually clicks for people,
13:15right? I know that we're just going over
13:16this on this thing I created, but when
13:19we go on the charts right now, I want
13:20you to pay attention to the relationship
13:22between aggression coming into a level,
13:24the actual result that the aggression
13:26produced, and then what happened after
13:28that continuation failed because the
13:31important thing here is not predicting a
13:33reversal. It's recognizing when the
13:35market is no longer rewarding aggressive
13:37participation. Now, let's take a look at
13:40what this actually looks like on a real
13:42footprint chart. So, here we're pushing
13:44into the highs and you can already see
13:46aggressive buyers coming in on the way
13:48up. We have initiative buying, we have
13:50positive delta, and we have
13:51participation that's expanding into this
13:54level or into this high. Now, this is
13:56where newer order flow traders or
13:58footprint traders usually make the
14:00mistake where they see aggressive buying
14:02and they automatically assume
14:04continuation. But, remember aggression
14:06alone is not enough. Price still needs
14:08acceptance above this level if this is
14:10the level that we're watching. So, look
14:12what actually happens here. We break
14:14above the level briefly and volume
14:16trades at the highs. The POC of this
14:18candle is sitting up here, meaning that
14:20there was a lot of transactions that
14:22were actually concentrated here at the
14:24highs. So, this tells us that real
14:26business traded up here and real
14:28participation actually happened. But,
14:30what matters is the result. Even with
14:32all of that buying aggression, price
14:34fails to continue higher. The breakout
14:36can't gain acceptance, and then look at
14:39this candle here. We have this red
14:41candle that actually has a positive
14:43delta. Now, it's only positive 15 if you
14:46can see this on the chart, but
14:47regardless, it's still a positive delta
14:49with a bearish candle. And this is an
14:52important concept because if you only
14:54focus on delta, you'd be thinking that
14:56buyers were still in control because we
14:58have a positive delta or it would have
15:00been positive as this candle was
15:01actually forming, right? Because if the
15:04POC is sitting up here, then if we were
15:05to go in a replay mode and you're
15:07watching this candle push up, you would
15:09have seen the candle have high amounts
15:11of positive delta. We would have been
15:13stalling up here before the candle
15:15flipped bearish towards the end of the
15:16candle. The result of this aggression
15:18from buyers is telling us a different
15:21story. Buyers are still being
15:23aggressive, but they're no longer being
15:25rewarded for that aggression. And that's
15:27the key idea behind absorption. Now,
15:29after we actually stall up here and
15:32buyers are aggressively trying to push
15:34price higher and not being successful in
15:37terms of outcome, we begin to see
15:39sellers step in aggressively. You start
15:41seeing imbalances hitting the bid, and
15:43it's coming back in the opposite
15:44direction. The absorption itself wasn't
15:46necessarily the trade signal. The
15:48absorption was the evidence that the
15:51breakout was failing. The confirmation
15:53came after we had the failed
15:54continuation, the inability to actually
15:56hold above the level, and then the
15:58pressure began to shift back lower. And
16:00that's why context matters so much. If
16:02this happened in the middle of chop and
16:04not at these highs, or if we were
16:05looking for a liquidity sweep, if we
16:07were watching the DOM and we saw levels
16:08stacked up here in terms of orders on
16:10the book, it's important to note. But if
16:13it's in the middle of the chop, I
16:15probably wouldn't care. But because it
16:16happened into the highs at meaningful
16:19location, after initiative buying
16:21expanded into a level, it becomes
16:23information that's actually worth paying
16:24attention to. Now, if you were to have
16:27an entry model, which I have entry
16:30models for absorption, but if you have
16:32an entry model, then where would you be
16:33placing your stop loss? Well, you would
16:35probably be placing it on the other side
16:37of where the absorption actually
16:38occurred. And you'd be targeting
16:39whatever you're targeting, right? So we
16:42have buyers push in, buyers get
16:43absorbed, they fail to continue higher,
16:45pressure flips, we start making our way
16:47back down. Now, this is just one
16:49example. It's actually not even a a
16:51perfect example. It's just from recent
16:53price action as I scrolled back to try
16:56and find a example on the chart for you
16:57guys. But the idea remains the same. The
17:01real edge in this is not spotting
17:03absorption. The edge is knowing when the
17:06absorption actually matters and where
17:08it's happening and whether the market
17:10confirmed that the aggression has
17:12actually failed. We're not using
17:14footprint to try and predict what the
17:16market's going to do. We we're looking
17:18at footprint charts to reveal the
17:20interaction between aggression,
17:22liquidity, and acceptance. So, effort
17:25shows the intent, but result shows the
17:27truth, and we can use the concept of
17:29aggression or effort versus result or
17:32outcome, and we can use that to
17:34potentially take trades. If you have any
17:36questions about absorption, I'm more
17:38than happy to try and answer them, so
17:40you can ask in the comment section
17:42below. I'll catch you guys next time I
17:44make a video. Peace.

About this transcript

This page contains the full transcript of How Absorption Actually Works on a Footprint Chart by Christopher Creamer | Orderflow Trader, generated from the public captions YouTube serves with the video. The transcript has 3,226 words across 502 segments, with the original timestamps preserved so you can click any line to jump to that moment in the embedded player.

What you can do with it

Use the transcript to take notes, quote the speaker, build a study guide, generate a summary with ChatGPT or Claude via the YouTube Summary tool, or export it as a timed subtitle file with YouTube to SRT. You can also re-open it in the transcriber to translate the transcript into 100+ languages.

Free YouTube transcript tool

YouTube2Text is a free YouTube transcript generator — no signup, no daily limit. Paste any YouTube link and get the full transcript instantly, with timestamps, click-to-jump, translation to 100+ languages, AI prompts for ChatGPT, Claude, and Gemini, and exports to TXT, SRT, VTT, or Markdown.