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, as the 1800 contracts on the bid show aggressive sellers are in control.
- Look for longs, as heavy bid volume at the low suggests passive institutional absorption of selling.
- Enter at the VWAP level to ensure a fair average price.
- Wait for the next bar to see if the delta flips to negative.
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