Home -
Brokers -
Main body -

WikiFX Express

Exness
EC markets
TMGM
XM
FXTM
FOREX.com
AVATRADE
IC Markets Global
FXCM
GMI

Absorption in trading: understanding its dynamics and FAQs

Skilling | 2023-12-29 15:17

Abstract:Absorption in the financial markets is a key concept that helps traders understand market dynamics and depth. This article will explain what absorption is, delve into how it works in trading, answer common questions about absorption, and highlight how Skilling's platform can be utilized in this context.

Absorption in the financial markets is a key concept that helps traders understand market dynamics and depth. This article will explain what absorption is, delve into how it works in trading, answer common questions about absorption, and highlight how Skilling's platform can be utilized in this context.

What is absorption?

Absorption in trading refers to a situation where the market 'absorbs' large orders without a significant price change. This typically occurs at key support and resistance levels where large quantities of buy or sell orders are placed. Absorption is an indicator of strong interest from buyers or sellers at a particular price level and can signal the potential exhaustion of a price move or the strength of a particular market level

How does absorption work?

Absorption works by balancing large orders with an equivalent amount of opposing orders. For example, in a scenario where there's a significant sell order at a particular price level, absorption occurs if there are enough buy orders to match this selling pressure, preventing a downward price movement. This is often observed through volume analysis and can be identified using order flow tools that show the depth of market orders at various price levels.

Example of absorption in CFD trading:

Imagine a scenario in CFD trading where an investor is trading a stock CFD, such as Apple Inc.

As the price of Apple's stock approaches a significant resistance level at $150, a large volume of sell orders is placed, indicating that many traders expect the price to fall from this level. However, if there is a strong presence of buyers who are willing to purchase Apple stock at $150, these buy orders will absorb the selling pressure.

This absorption could stabilize the price at the resistance level, indicating a strong contest between buyers and sellers. If the buyers eventually outweigh the sellers, the price might break through the resistance level, leading to a potential upward trend.

Example of absorption in Forex trading:

In Forex trading, consider the EUR/USD currency pair approaching a key support level at 1.1800. As it nears this level, traders observe a significant increase in sell orders, suggesting a bearish sentiment. However, if there is an equally strong influx of buy orders at this price level, these orders will absorb the selling pressure.

This absorption indicates that the market is not ready to push the price below the support level, showing resilience against the downward trend. If the buying pressure continues to match or exceed the selling pressure, it could lead to a reversal, with the price bouncing back from the support level.

Answers to some FAQs

1. What does absorption indicate in market analysis?

Absorption suggests strong buying or selling interest at a specific price level, potentially signaling a trend reversal or continuation.

2. How can traders identify absorption in the market?

Absorption can be identified through volume analysis and order flow tools, which show large orders being matched by opposing orders at key price levels.

3. Does absorption always lead to a price reversal?

Not necessarily. While absorption can indicate potential reversals, it may also signify the continuation of the current trend if the absorbed orders are eventually outweighed.

4. How important is context in interpreting absorption?

Context, including overall market trends and technical indicators, is essential for accurately interpreting absorption signals.

5. Can absorption be a standalone trading signal?

While absorption provides valuable insights, it's best used in conjunction with other analysis methods for more reliable trading signals.

6. How does absorption differ in high-liquidity markets?

In highly liquid markets, absorption might occur more frequently and require significant order volumes to impact price movements.

7. What role does absorption play in range-bound markets?

In range-bound markets, absorption can be a key factor in maintaining the price within the range, especially at established support and resistance levels.

8. Is absorption relevant in both bullish and bearish markets?

Yes, absorption is relevant in all market conditions, indicating strong buying pressure in bullish markets and strong selling pressure in bearish markets.

img_v2_ff2b99dc-3016-43b7-b9d9-35658d24d40g.png
Broker

Related broker

Regulated
Skilling
Company name:Skilling Ltd
Score
6.25
5-10 years | Regulated in Cyprus | Market Maker (MM) | MT4 Full License
Score
6.25

Read more

AMarkets Licensing Details: What Their Offshore Regulation Really Means for You

When choosing a broker, the most important question is always: "Are my funds safe?" The answer depends on the broker's regulatory framework. For a company like AMarkets, which has been operating since 2007, understanding its licensing isn't just about checking a box. It's about understanding what that regulation truly means for your protection as a trader. This article provides a clear, detailed breakdown of AMarkets' licenses, what their offshore status really means, the extra safety measures it uses, and the risks you need to consider. We will go beyond marketing claims to give you factual, balanced information about their official licenses and other trust signals, helping you make a smart decision.

Original 2025-12-19 20:24

AMarkets Safety Review: Is Your Money Protected?

The question "Is AMarkets safe?" is the most important thing any trader can ask before investing. Putting your capital in a trading company requires a lot of trust, and the answer isn't simply yes or no. It's complicated and depends on understanding how the company works, what protections they have, and their past performance. To give you a clear answer, we've done a complete safety review of AMarkets. Our research looks at three main areas, each examining a different part of the company's safety. We'll share what we found using facts you can check, so you can make your own smart decision about whether your capital will be safe.

Original 2025-12-19 19:51

NPE Market Review: Why to Stay Away

NPE Market review shows blocked accounts, no regulation, and low trust—best to stay away.

Original 2025-12-19 18:56

ZarVista Community Feedback: What Users Really Think About This Broker

This article gives you a complete, fair look at ZarVista (now called Zarvista Capital Markets as of September 2024). We'll examine what users say, check the company's legal status, and investigate the biggest problems users report. Our goal is to give you clear, factual information so you can make a smart decision based on evidence, not just marketing promises. We'll look at both the good services they offer and the serious issues you need to think about carefully.

Original 2025-12-19 18:10

WikiFX Express

Exness
EC markets
TMGM
XM
FXTM
FOREX.com
AVATRADE
IC Markets Global
FXCM
GMI

WikiFX Broker

FXTM

FXTM

Regulated
ATFX

ATFX

Regulated
XM

XM

Regulated
BCR

BCR

Regulated
Exness

Exness

Regulated
GMI

GMI

Stoppage of Business
FXTM

FXTM

Regulated
ATFX

ATFX

Regulated
XM

XM

Regulated
BCR

BCR

Regulated
Exness

Exness

Regulated
GMI

GMI

Stoppage of Business

WikiFX Broker

FXTM

FXTM

Regulated
ATFX

ATFX

Regulated
XM

XM

Regulated
BCR

BCR

Regulated
Exness

Exness

Regulated
GMI

GMI

Stoppage of Business
FXTM

FXTM

Regulated
ATFX

ATFX

Regulated
XM

XM

Regulated
BCR

BCR

Regulated
Exness

Exness

Regulated
GMI

GMI

Stoppage of Business

Latest News

Coinbase Expands Into Stocks and Tokenized Assets

WikiFX
2025-12-19 18:25

The Silent Killer: Why Your Biggest Wins Often Precede Your Worst Crash

WikiFX
2025-12-18 14:30

Razor Markets Regulation Explained: Real User Reviews Exposed!!

WikiFX
2025-12-18 18:29

Equiti Regulation: Compliance and Licensing Info

WikiFX
2025-12-18 18:28

FAKE TRADES ALERT: How Long Candles Are Used to Mislead Retail Traders

WikiFX
2025-12-18 17:06

London Capital Group – Regulation & Genuine User Reviews

WikiFX
2025-12-19 16:31

ZarVista Review 2025: A Complete Look at Its High-Risk Profile

WikiFX
2025-12-19 17:07

JRJR Review: Why a "Valid" License Can't Hide the Withdrawal Nightmare

WikiFX
2025-12-19 17:08

EC Markets Opens New Marketing Hub in Central Limassol

WikiFX
2025-12-19 14:45

Voices of the Golden Insight Award Jury | Greg Matwejev, Chief Market Strategist of BCR

WikiFX
2025-12-19 18:08

Rate Calc

USD
CNY
Current Rate: 0

Amount

USD

Available

CNY
Calculate

You may also like

Everstead

Everstead

WEALTH HIVE OPTION

WEALTH HIVE OPTION

Tellidex

Tellidex

ATLAS OPTION

ATLAS OPTION

FINTIXTRADE

FINTIXTRADE

FINCORP

FINCORP

PAROXFX

PAROXFX

saxo TraderGO

saxo TraderGO

Smarttradershive

Smarttradershive

Fyntra

Fyntra