medium · Order Flow Analysis absorption-exhaustion-imbalance
In the $10-Year Treasury (ZN), a footprint bar shows a diagonal ratio of 3.5:1 at three consecutive levels, but the total volume at each level is only 500 contracts.
How should a professional practitioner interpret this 'stacked imbalance'?
- Ignore the signal, as 500 lots in ZN represent retail noise rather than institutional conviction.
- Execute a maximum position trade, as three levels of 300%+ imbalance is the highest probability signal.
- Wait for the VWAP to cross these levels to confirm the algorithmic intent of the 500-lot orders.
- Treat it as an 'unfinished business' level because the volume is too low to have completed the auction.
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