medium · Order Flow Analysis absorption-exhaustion-imbalance
Price reaches the current session's VWAP - 2σ band. At this level, a $4-range ES chart prints a bar with a stacked buying imbalance across three levels and a positive delta.
How does the VWAP context influence the trade decision?
- The VWAP band is irrelevant because order flow is a leading indicator while VWAP is a lagging calculation.
- It suggests the trader should wait for price to cross back above VWAP before entering, to ensure the trend has shifted.
- It increases the trade's conviction as the footprint signal occurs at a statistically cheap price extreme.
- The trader should sell, because price at the -2σ band indicates a strong downtrend that is likely to continue.
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