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Your Mistakes With Absorption | The 4 Reasons It Fakes You Out

Sires · 2,161 words · 10 min read

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0:01All right, guys, and welcome back to

0:03another video. And today we are talking

0:05about your mistakes with absorption,

0:07right? Like the actual mistakes you are

0:09making that you can probably get rid of.

0:11You're probably entering on trades.

0:12You're probably re-entering a lot of

0:13times with absorption just because

0:15you're making these four mistakes,

0:16right? And let's go over the first one,

0:18right? A lot of you guys are not waiting

0:20for a reward system. I've explained this

0:21in my Dom with Advance video. You can

0:23check out on my YouTube channel, but it

0:25is basically just a confirmation that

0:26the absorption will actually work. I

0:28would rather for you guys to enter on

0:30confirmations after the absorption has

0:32occurred rather than just entering

0:33straight after the the absorption,

0:35right? Just because you can easily be

0:37faked out. It's about like a 27% chance

0:40all absorptions fail without a

0:43three-tick replenishment of a reward

0:45system. So, meaning that it needs to go

0:47in your direction within three ticks

0:49after the absorption for it to actually

0:51work out, right? To get rid of that 27%

0:54failure rate. So, I mean, you can see

0:56here there's many ways of knowing, like

0:59simply, a reward system. One way, for

1:01example, here. You can see here buyers

1:03are coming in, right? Buyers are coming

1:05in at this top wick. Price comes down.

1:07Then we have sellers confirming the

1:09move, right? To the downside. However,

1:12these sellers, they're not being

1:13replenished strongly. They're not being

1:15refreshed strongly. You can, for

1:16example, use the time and sales tool or

1:19the speed of tape tool, right? And you

1:21can see, for example, sellers are

1:22replenishing, sellers are replenishing,

1:24and then buyers just step in instantly

1:26when these sellers came in, right? So,

1:28now you know buyers are trying to defend

1:29where would you enter where buyers are

1:31trying to defend? You would want more

1:32sellers to come in and, you know, be

1:34aggressive. Even here you can see, in

1:36terms of CVD, we have the median line

1:38and price is obviously above this median

1:40line, showing you that overall

1:42directional aggression in terms of

1:44delta, buyers are strong. And you can

1:46even see that we're in an uptrend,

1:48right? Remember, absorption you only use

1:50it logically in reversal type of

1:52scenarios. You're not using it with

1:54trying to catch a continuation of a

1:55move. So, you would try to take shorts

1:57here, right? To catch that fade of the

1:59trend that we are going up in. So, you

2:02can see here in directional terms of

2:04CVD, in terms of delta, price is bullish

2:06and we are going up. We're above the

2:08median line. When we start to fall off,

2:10what's price doing? We fall off, but we

2:12just test this obviously this median

2:15line of CVD, showing you that we're

2:17still bullish. So, that is one really

2:19simple way of just waiting for, you

2:22know, a reward system. Now, we can go to

2:23the second one. Not following the

2:25auction. I have to like always preface

2:28this a lot of times. A lot of beginners

2:29do this, right? They think that

2:31understanding all the order flow tools,

2:33such as the footprint, deep trades, the

2:35DOM, the footprint, like all of these

2:37things, right? That can show you orders

2:39and they're all virtually showing you

2:40all the same information, even the heat

2:42map, things like that, right? They are

2:44all order flow tools. However, you're

2:45not going to be successful with them if

2:47you don't understand the auction, if you

2:49don't understand where price is. If

2:51you're just randomly entering where

2:52absorption occurs in a random auction

2:54that don't even know who should be in

2:56control, who should like, you know, you

2:57should give leniency towards, you don't

2:59know who should be like, you know,

3:00having strength and things like that,

3:02then you will fail, right? You need to

3:04understand this. This is probably like

3:05the number one mistake I always see

3:07people doing, but

3:09you've probably been watching my channel

3:10a lot. You've probably, you know,

3:11understood absorption a lot now from my

3:12recent videos and like, you know, me

3:14live trading videos and things like that

3:16and you've seen like, you know, all the

3:18mistakes and that's why I'm putting it

3:19as a number two priority, not number one

3:22anymore, just because a lot of people

3:23are finally understanding the auction

3:25and understanding that it really

3:27depends. So, I can show you an example,

3:28right? We have a daily VP. This is

3:30showing you the, you know, current day's

3:33volume and here we have a delta profile

3:36next to it.

3:37And you can see here, it automatically

3:38draws out the predefined areas, such as

3:41value area high, value area low and POC,

3:43right? And you can see here, this is not

3:45absorption. People would think this is

3:47absorption. If you were not to see this

3:48volume profile and you just saw that

3:50we're going up with an uptrend, buyers

3:52come in, they get hit to the wall, then

3:54we have a bunch of sellers coming in,

3:56showing you that the opposition is

3:57failing, you know, buyers are failing

3:59cuz that's the opposite side, and your

4:00side is winning. Obviously, the sellers,

4:02right? Because you're trying to fade

4:03this trend, you're trying to enter on a

4:04absorption reversal signature. However,

4:07did we go down? No, we didn't. We just

4:09came back up, most likely hit your stop

4:11loss unless you're talking to like a

4:12one-to-one, right? And where is this in

4:14terms of the auction? Well, we are close

4:16to, you know, balance. We're close to

4:18POC, and price loves to obviously stay

4:21within this area and just basically chop

4:22within this area. So, do you really

4:25think this is a good area to have an

4:26absorption signature? Most likely not.

4:29You would rather have it at extremes

4:31such as ledges and shelves. If you don't

4:32know what that is, you can obviously

4:34find it on my YouTube channel, but yeah.

4:36And I always say that value area high,

4:38value area low,

4:39these are areas that are obviously

4:42extremes, right? But they are arbitrary

4:43values, meaning that they shift while

4:45price shifts. It's sort of like a

4:46lagging indicator. I wouldn't

4:48necessarily enter on a on current

4:51necessarily an extreme on current day

4:54VP, value area high and value area low.

4:56Maybe previous days ones, right? But

4:58this one is a predefined area that

5:00always moves as price moves on. So, you

5:02wouldn't necessarily use these extremes.

5:04You would want to use real extremes such

5:06as shelves and ledges and low volume

5:08nodes and my high volume nodes, right?

5:09So, again, that is another mistake that

5:12a lot of you guys are making, just not

5:13following the auction. And number three

5:16is not understanding the logical

5:18barriers. You first have to understand

5:19the definition of what is actually. So,

5:22the normal simple Google definition,

5:24right, is that absorption means the

5:25process of one thing taking in, soaking

5:28it up, or receiving another substance,

5:30right? So, if you just think of it like

5:32a sponge, right? Um like we're going up,

5:35we're going aggressively with a ton of

5:36effort from buyers, right? We're just um

5:38pumping, right? So, if I were to

5:40actually show you, we're just pumping,

5:42pumping, pumping with a bunch of

5:43aggressive buyers coming in, right? In

5:45terms of orders, they're aggressive,

5:46they have effort, things like that. Then

5:49we go up and we instantly hit a wall,

5:52right? And what is that wall? This is

5:54passive sellers coming passively,

5:56they're coming in. Then you see a

5:58bubble, right, of aggressive buyers

6:00coming in on the deep trades. And then

6:02we go lower. You're thinking, well, we

6:04should go technically higher then,

6:05right? Because we have a ton of effort

6:07from buyers. However, they're not being

6:08rewarded. So, you can assume that these

6:11um sellers are coming in passively to

6:13stop these aggressive um effort buyers,

6:16right? Now we're going down having no

6:17effort no reward and we just fall these

6:19buyers and we're going lower. Then a

6:21seller aggression comes in showing you

6:22there's a reward system now, you know,

6:24from down taking for, you know, your

6:27aggression. So, now it's actually

6:28receiving it from another like energy

6:31source you can say but, you know, um you

6:32wouldn't say that though. It's just

6:33aggressiveness of your side coming in.

6:36And what does price do? Price just just

6:38goes and dumps, right? And I would

6:40always like you guys anyways to enter on

6:42the test of the um reward system just

6:45because that is showing you even extra

6:46confirmation. So, we got, you know,

6:48buyers hitting to the wall having no

6:50result. And you know, there's a bunch of

6:52effort from buyers and they're all being

6:53stopped out by these passive sellers

6:55that are coming in to soak it up, right?

6:57Now we are going lower with

6:59aggressiveness on our side, the

7:00opposition's failing, our side is

7:02winning. Now, just in order to know this

7:04is actually our side winning and not for

7:06us to just go all the way up, we have a

7:08test with a decent amount of refresh

7:10orders in the time and sales. You could

7:11even see it on the DOM, you could see it

7:13um on the footprint, you know, selling

7:14balance says whatever. We go lower and

7:17yeah, that is absorption and that's how

7:18you enter on confirmation of an

7:20absorption, right?

7:22And the um last thing is

7:25waiting for your side to win and the

7:26other side to lose control. I basically

7:28just explained it but I can show you a

7:30better way. The easiest way to actually

7:32see this is delta, right? And you can

7:34see here obviously, like we explained

7:35before, this is not absorption. A buyer

7:38comes in, sellers come in. You enter,

7:39that's great, but where are we in the

7:41auction? We are at POC. This is where

7:43price is most likely to chop. You know,

7:45there's on like decisive area of what

7:47who should be in control, who should

7:49have leniency. So, you wouldn't you

7:51would disregard this, you would just

7:52filter out, you wouldn't want to enter

7:53that. However, we come to the value area

7:55high, buyers come in, they get hit to

7:57the wall, and then sellers come in for

8:00reward system. But, where does this hit

8:01to the wall come from? Roughly around

8:03where a high delta spike area is. So, of

8:06buyers, the opposition is obviously

8:08losing control, you know, bunch of

8:10buyers are coming in, but obviously

8:12sellers are coming in passively to stop

8:14this aggression of buyers, of this

8:15effort of buyers. So, they are being

8:17absorbed, they're basically being soaked

8:19up passively by sellers. Same thing down

8:22here where we go below value area low,

8:24we have a failed auction. So, right

8:26here, if I were to draw it in red,

8:29um right here, this is known as a failed

8:31auction because we just come out of

8:33balance, and now there's obviously a 70

8:35to roughly 80% chance we'll come back

8:37into balance as price likes to stay

8:39within balance 70 to 80% of the time.

8:42And again, we have a high delta spike.

8:44By the way, what I wrote there before

8:46was wrong, I just deleted it, but yeah,

8:47we had a high delta spike of buyers,

8:50right? Regaining control, these sellers

8:51are being absorbed at the bottom

8:52passively, and now we go back up, right?

8:55Back into balance. So, these are the

8:57four main ways that I think a lot of you

8:59guys are making mistakes on. And yeah,

9:01you guys can comment down any other

9:03things that you guys are entering on

9:04like, for example, failed auction

9:05setups, like scenarios with AMT, or

9:07maybe like, you know, some confirmation

9:09entries that you guys take, and maybe um

9:11you know, you know, you know, you want a

9:13video like this where I can talk about

9:15mistakes that you might be making, and

9:16you can implement this, you know, to

9:18have extra layer of confirmation, just

9:20so you can be profitable with

9:21absorption, right? I do have a free PDF

9:23resource of what I just explained with

9:25all of these scenarios and everything

9:27there with a checklist and things like

9:28that in the description, right? So, you

9:31guys can check that out, and it'll be a

9:32bit more in-depth as well. These videos

9:34are like a bonus. The PDF resource is

9:36like the main thing to take from this

9:38just because you can see it on the side

9:40of your screen, for example, while

9:41you're taking the trades, you can tick

9:42it off as you go on and do if you were

9:44to use the checklist, of course. And

9:46make sure you guys like and subscribe if

9:48you want more content like this. And

9:50yeah, that is pretty much it. I'll see

9:51you guys soon.

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