Exhaustion

Exhaustion describes the point where a price move that has been running hard in one direction starts to run out of buyers or sellers to keep pushing it further. It is not a single indicator or a rule with a number attached; it is a description of a market condition, usually spotted after the fact or inferred from a handful of visual and volume clues on a chart.

In practice, exhaustion tends to show up after a sharp, extended rally or selloff, once the move has already pulled in most of the traders who wanted in. Late buyers (in an uptrend) or late sellers (in a downtrend) have already committed, which means there is a shrinking pool of new participants left to keep the momentum going. Price may still make a new high or low, but the follow-through weakens, volume often tapers off or spikes erratically, and candles can get longer with big wicks as the two sides fight over the last few ticks.

The nuance that trips people up is that exhaustion is a read on supply and demand thinning out, not a guarantee of a reversal. A move can look "exhausted" and then simply pause, consolidate sideways, or exhaust further in the same direction before turning. Traders often confuse exhaustion with a clean reversal signal, but it only tells you conviction is fading, not which way price goes next or when. That is why exhaustion is usually paired with a confirming signal, such as a reversal candle, a break of a short-term trendline, or a volume pattern, rather than traded on its own.

Because it is a judgment call rather than a fixed calculation, different traders will disagree about whether a given move is exhausted. It is best treated as one piece of context that lowers your confidence in a move continuing, not as a standalone trigger.