In plain language
During absorption, aggressive orders keep executing against passive liquidity at one price or within a small area, while the market advances little relative to traded volume.
What can be observed
Useful data include executions, aggressor side under the feed's methodology, prices, time, and preferably order-book updates. Repeated fills at one level while passive quantity remains or replenishes are consistent with absorption. Displayed book size alone is insufficient because orders can be cancelled or updated.
What it does not prove
High volume with little movement can also reflect a liquid market, trade classification, aggregation, or opposing flows. Absorption does not automatically prove a reversal, an iceberg, or a single large participant.
Operational verification
Record venue, feed, granularity, interval, executed volume, price change, replenishment, and subsequent behavior. Volumetric analysis provides context; Imbalance separates quantity skew from the relationship between effort and result.
Sources
- CME Group, Assessing liquidity — Distinguishes passive liquidity, aggressive flow, quote refresh, and price impact.
- CME Group, Market by Order (MBO) — Explains the depth, individual-order, and queue details available in an order-by-order feed.
- TradingView, Volume footprint charts: a complete guide — Documents buy/sell volume, delta, price levels, and footprint aggregation.