Mastering Order Flow with Absorption and CVD – A Game-Changer for Traders, My Biggest Win Of 2025 Was Only 40 Seconds
Is OrderFlow Overrated? Or Does It Give You A Genuine Edge in The Market?
Hey Traders,
In our previous discussions, we touched on the concept of trapped traders and absorption. Today, I want to dive deeper into this topic and show you how pairing absorption with Cumulative Volume Delta (CVD) can elevate your trading game. This combination is a powerful tool that can give you the confidence to take high-probability trades and stay ahead of the market.
Let’s break it down.
Absorption + CVD: The Dynamic Duo
When you see a down candle forming with positive delta, it’s a clear sign that buyers are being absorbed. But here’s the thing: absorption alone isn’t enough to take a trade. This is where CVD comes into play.
What is CVD?
CVD measures the net difference between buying and selling volume in real-time. It tells you whether buyers or sellers are in control.How to Use It:
If you’re looking to go short, you want to see buyers being absorbed (trapped) and the CVD trending downward. This indicates that selling pressure is increasing.
If you’re looking to go long, you want to see sellers being absorbed (trapped) and the CVD trending upward, signaling that buying pressure is building.
When price retests a level of interest (like an absorption zone), and the CVD confirms the imbalance (e.g., more selling than buying for a short setup), that’s what I call an A+ Setup. It’s a high-confidence trade with a clear edge.
Why This Works
Not all absorption leads to a reversal or continuation. Sometimes, the market just chops around. But when you pair absorption with CVD, you get a clearer picture of the market’s intent.
For example:
Short Setup: Buyers are absorbed, CVD is down, and price retests the level with even weaker buying pressure (CVD is lower than before). This is a strong signal to go short.
Long Setup: Sellers are absorbed, CVD is up, and price retests the level with even stronger buying pressure (CVD is higher than before). This is a strong signal to go long.
A Real Trade Example
Let me share a recent trade I took. There was a big bullish candle, followed by a straight flush to the downside. Why did I go short instead of long?
Absorption: The bullish candle showed buyers being absorbed.
CVD Confirmation: The CVD was trending downward, indicating selling pressure was increasing.
Trapped Traders: The big bullish candle trapped buyers, and the subsequent move down confirmed the imbalance.
This is where order flow shines. It helps you see what’s happening beneath the surface and execute with confidence.
Pro Tip for Advanced Traders
For those of you looking for precise entries, try applying this strategy on a 20-range chart. The granularity of the range chart can help you spot absorption and CVD imbalances more clearly, giving you an even sharper edge.
Mindset Matters: "Best Loser Wins"
I’ve been reading Best Loser Wins by Tom Hougaard, and I can’t recommend it enough. This book isn’t about trading strategies; it’s about the mindset and thought process you need to succeed in trading.
One quote that stuck with me: “Normal Thinking Never Wins.”
This perfectly aligns with the trade I just shared. A big bullish candle? Most traders would think, “Go long.” But with order flow, I saw the selling imbalance and went short. It’s about thinking differently and trusting your edge.
Final Thoughts
Trading isn’t about being right 100% of the time. It’s about finding an edge and executing with discipline. By combining absorption with CVD, you can gain a deeper understanding of the market and make more informed decisions.
Keep practicing, stay disciplined, and always focus on the process.
Until next time,
FH
P.S. If you haven’t already, grab a copy of Best Loser Wins. It’s a game-changer for your trading mindset.