Absorption Bubbles

Absorption Bubbles


Chart example (how to read it)
Green and red bubbles highlight candles with unusually high relative volume where price action suggests rejection (potential absorption) rather than clean continuation. Horizontal lines mark strong reaction levels and remain visible to track future retests/mitigation. The top-right table summarizes the current volume environment: Session RVOL (today vs average), Bar RVOL (current bar vs normal), Efficiency (volume-to-movement proxy), and an ATR-based stop distance (volatility reference).


This indicator helps you interpret relative volume participation and price reaction to highlight potential absorption / rejection areas without requiring Level 2 (order book) data.

What it does

1. Absorption Bubbles: Marks candles where volume is meaningfully higher than normal (relative volume) and where price action suggests a rejection rather than clean acceptance.

2. Persistent Zones (optional): When a strong event is detected, the script can draw a horizontal level/zone that remains on the chart to track retests and mitigation.

3. Volume Regime Table: Displays session and bar relative volume to quickly gauge whether the market is operating in a low-, normal-, or high-liquidity environment.

4. ATR Stop (RMA): Provides an ATR-based stop distance to standardize risk under changing volatility.

Why it’s useful

1. Helps identify moments when participation increases and price either rejects (often associated with absorption/defense) or moves efficiently (often associated with continuation).

2. Adds context to decide whether conditions are more likely choppy/rotational or trending/displacing, using volume and volatility proxies.

3. Keeps key reaction levels visible via zones, making retests easier to track.

How to use it

1. Start with the table:

: Higher Session RVOL generally means more liquidity and potentially better follow-through.

: Higher Bar RVOL highlights unusually active candles.

2. Focus bubbles around key locations:
Use bubbles as confirmation near important levels (session highs/lows, prior day levels, HTF
zones, obvious liquidity pools). Avoid treating mid-range bubbles as standalone signals.

3. Use zones as decision levels (if enabled):
Watch for clean rejection from the zone, or a decisive body break and retest for
continuation.

4.Use ATR Stop as a volatility reference:
Multiply the ATR value to match your risk model and instrument volatility.

Settings guidance

1. Increase RVOL thresholds to reduce noise (fewer, higher-quality signals).

2. Decrease thresholds to catch more frequent micro-events (more signals, more false positives).

3. Adjust lookbacks based on timeframe and instrument.

Limitations

1. This script does not use bid/ask delta or full order book information.

2. “Absorption” is inferred from volume + candle behavior, so signals should be used as confluence, not as a standalone trading system.