Exhaustion

AAA

DEFINITION of 'Exhaustion'

Situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions. Exhaustion signals the reversal of the current trend because it illustrates excess levels of supply or demand.

INVESTOPEDIA EXPLAINS 'Exhaustion'

Traders can identify periods of exhaustion by looking at the Commitments of Traders Report. This report is published every week and shows levels of open interest in the futures markets. An excessively high number of long contracts could indicate that everybody who wishes to be long has already taken a position, leaving few investors to buy these assets back at a higher price.

RELATED TERMS
  1. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  2. Demand

    An economic principle that describes a consumer's desire and ...
  3. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  4. Open Interest

    1. The total number of options and/or futures contracts that ...
  5. Reversal

    A change in the direction of a price trend. On a price chart, ...
  6. Supply

    A fundamental economic concept that describes the total amount ...
RELATED FAQS
  1. Why is the Time Segmented Volume (TSV) important for traders and analysts?

    Time Segmented Volume (TSV) was designed to track the relationship between a security's trading volume and its price movements. ... Read Full Answer >>
  2. How do traders create strategies based on Chikou Span?

    The Chikou span is the lagging indicator component of the Ichimoku Kinko Hyo candlestick trading model. The Chikou is a line ... Read Full Answer >>
  3. What is the disparity index formula and how is it calculated?

    Steve Nison introduced the disparity index in his book, "Beyond Candlesticks," as a way to analyze price movements in candlestick ... Read Full Answer >>
Related Articles
  1. Forex Education

    The Seven-Day Extension Fade

    It's possible to pick a top or bottom with no indicator support. We'll show you how this strategy works.
  2. Options & Futures

    Using Open Interest To Find Bull/Bear Signals

    Volume should inform your use of this indicator in confirming trends and reversals.
  3. Options & Futures

    Intro To Open Interest In The Futures Market

    Applied primarily to the futures market, this indicator confirms trends and reversals.
  4. Forex Education

    Forex: The Moving Average MACD Combo

    Learn a strategy with clear entry and exit levels that will get you into a trend at the right time.
  5. Options & Futures

    Forecast The FX Market With The COT Report

    Three empirical findings on futures data can help currency traders determine buy and sell points.
  6. Charts & Patterns

    Market Reversals And How To Spot Them

    The sushi-roll indicator may help lower the risk of trying to pick market tops and bottoms.
  7. Forex Strategies

    The 10 Riskiest Investments

    Investors seeking high returns must also be prepared for high risk. Here are ten of the riskiest investments available.
  8. Options & Futures

    Was Buffet Right about Derivatives as WMDs?

    Why Warren Buffet described derivatives as weapons of mass destruction, and when can they be helpful or harmful?
  9. Options & Futures

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  10. Options & Futures

    Advantages Of Trading Futures Over Stocks

    We look at the top eight advantages of trading futures over stocks.

You May Also Like

Hot Definitions
  1. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage.
  2. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  3. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  4. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  5. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  6. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
Trading Center