Exhaustion

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.

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RELATED FAQS
  1. Tame Panic Selling with the Exhausted Selling Model

    Discover what the exhausted selling model is and how it can be used by traders who are looking to profit from the panic sale ... Read Answer >>
  2. How are Exhaustion Gap patterns interpreted by analysts and traders?

    Learn how to spot and interpret exhaustion gap patterns like traders and analysts do, and see why these patterns are considered ... Read Answer >>
  3. How effective is creating trade entries after spotting an Exhaustion Gap pattern?

    Understand the components of the exhaustion gap pattern, how and why it occurs, and how it can be used to create an effective ... Read Answer >>
  4. How do I build a profitable strategy when spotting an Exhaustion Gap?

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