medium · Order Flow Analysis absorption-exhaustion-imbalance
A trader observes a bar in the ES with a COT near the low, but the bar closes near its high. At the COT level, bid volume was 1800 and ask volume was 850.
How should this be traded?
- Look for shorts, since the 1800 contracts stacked on the bid show aggressive sellers remain firmly in control of the tape.
- Look for longs, as heavy bid volume at the low suggests passive institutional absorption of selling.
- Simply enter at the day's VWAP level so the fill represents a fair average price across the session.
- Wait for the next bar to print and see whether the cumulative delta actually flips to negative before acting.
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