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Hi everyone, I run an algo that detects large absorption levels on /ES and have found these levels to be quite accurate for trading rebounds.
I gave it a whacky name, MAD Levels (Mechanical Absorption Detection Levels). There are 2 types of levels: Long term and short term. The Long term levels look back 4 months and the short term levels look back 3 months.
I have output these levels into indicators for both TradingView and Ninjatrader.
It is in beta right now and please feel free to try them out and appreciate any feedback:
For other platforms, you need to draw them manually at this point in time. If you wish to receive these levels, please DM me or email me at [email protected]
This just draws predetermined levels. Without an understanding of what you're defining as "large absorption levels", there's really no way to evaluate this.
Short term levels are the levels whereby unusually large buy/sell orders cannot push price further (i.e. absorbed). In terms of the size of such orders, its like the end of a bell-curve distribution if you may.
Long term levels are like the short term levels but the buy/sell orders are even larger.
Short term levels look back 3 months, whereas long term levels look back 4 months.
Because of the size of orders being absorbed, they could represent price levels that are defended by large traders. Experience has shown that prices tend to hang around these levels or just rebound from them.
When long term levels overlap with short term levels, the level is significant. When many levels are close to each other, it forms a supply/demand zone.
