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. Futures Market

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

    A fundamental economic concept that describes the total amount ...
  3. Reversal

    A change in the direction of a price trend. On a price chart, ...
  4. Long (or Long Position)

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

    1. The total number of options and/or futures contracts that ...
  6. Demand

    An economic principle that describes a consumer's desire and ...
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. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  8. Investing Basics

    Explaining the Liquidity Preference Theory

    According to the liquidity preference theory, investors demand interest in return for sacrificing their liquidity.
  9. Options & Futures

    Ultra ETFs Are Not Your Father's ETFs

    Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
  10. Active Trading Fundamentals

    How to Trade Dow Jones Future Contracts

    Learn about the Dow Jones Index futures contracts available and obtain step-by-step instruction on how to trade the stock index futures.
  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. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center