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.

BREAKING DOWN '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.

  1. Supply

    A fundamental economic concept that describes the total amount ...
  2. Futures Market

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

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

    1. The buying of a security such as a stock, commodity or currency, ...
  5. Reversal

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

    1. The total number of options and/or futures contracts that ...
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. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  8. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  9. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  10. Mutual Funds & ETFs

    The Risks of Investing in Inverse ETFs

    Discover analyses of the risks inherent to inverse exchange-traded funds (ETFs) that investors must understand before considering an investment in this type of ETF.
  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 >>
  4. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  5. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  6. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!