easy · Order Flow Analysis absorption-exhaustion-imbalance
A trader is in a short position. A new 5-minute bar forms that closes green and shows a stacked buying imbalance at the bottom of the bar.
What protocol should be followed?
- Reduce or exit the position; a clear opposing setup has formed, invalidating the original short thesis.
- Add to the short position at the new bar's price to average down the entry cost slightly.
- Ignore the new bar entirely and stay short as long as the original stop-loss has not yet been hit.
- Widen the stop-loss so it sits just above the newly formed buying imbalance zone to avoid an early stop-out.
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