It is a well-known psychological phenomenon that the majority of traders make their buy decisions when they believe that the price has fallen too far, too fast. Conversely, they tend to sell a security if its price has risen too far, too fast.
These occurrences typically manifest through behavioral patterns. For example, the increased number of order cancellations that occurs on either the bid side or the ask side of the order book.
The Commitment algorithm extracts the intent of all market participants, indicating overall commitment of the market to move in the current direction. When lit, the Commitment algorithm is saying: “Opportunity has formed and is strengthening, stay tuned”.