DOM games

[brownsfan019 17]

One attraction to the DOM's with futures trading is trying to 'see' where the market might go based on the volumes shown on the dom. I've read posts where newbies fall into this trap.

 

I wanted to provide an example I saw today and over time we'll see if myself or others can provide some snapshots for review.

 

The point is simple - to show that there are plenty of games that go on with the DOM and in my opinion, placing too much (or any) weight in them can be a slippery slope.

 

 

[Reaver 10]

Thanks for the info man, nice to know.

[hanz 10]

yup

 

saw that many times too

 

guess u just cant trust the DOM

 

also OEC trader has iceberg feature

 

hope they will add T&S on the next upgrade

[brownsfan019 17]

And some more today...

 

[brownsfan019 17]

What I've noticed here is that when you see heavy buyers or sellers sitting, they can act like a magnet. Price seems to gravitate towards them.

 

Now the question is why... why does price want to gravitate there (if it in fact does on a regular basis)? Are trades being filled there or do 'they' know that 'they' can create artificial pressure?

 

The above post I put was a great example. There appeared to be heavy sellers a few times and price has continued to rise. At first glance, it would seem that there was some possible resistance there; however, that was not the case at all...

 

It would be interesting to see some documented research on this topic. Is there really something there to use? If so, could it be used in a discretionary approach or would this require ultra-fast timing by computers...

 

Just some ideas, a little talking out loud here.

[Minetoo 10]

There was some discussion a few years back about implementing a punitive fee for lifting the bid or offer, so traders could get a truer picture of market demand. It died a quiet death.

[brownsfan019 17]

There was some discussion a few years back about implementing a punitive fee for lifting the bid or offer, so traders could get a truer picture of market demand. It died a quiet death.

 

Wonder why.

 

:o

[brownsfan019 17]

[TinGull 10]

This happened sooooo much today in the ES. I'd never seen the games played like that before...granted I haven't been doing this very long...almost a year...but still, that was weird seeing huge lots being offered and then taken away.

[Soultrader 12]

Very interesting topic here. In Japan, these withdrawing bid/ask in tremendous size is illegal. Which is why the Dom information is more clear.

 

Many scalper trade just off the dom making the bid/ask spread. This works well in the Nikkei where the tick size is approx $90 per contract a tick. I can not do this successfully.

 

We also have off exchange transaction system in which block orders can be negotiated between a buyer and seller directly. These block orders do not show up on the Dom but will send a print at the open and EOD. Hence this block size is incorporated into volume at the EOD only. (pretty annoying in my opinion) They do this in order to prevent artificial price movement.

 

Brownsfan mentioned how price gravitates towards the heavy bid/ask levels. I find this interesting as it is the exact opposite with the Level 2 screens in Japan both for futures and equities. Im assuming it is due to bid/ask games constantly being played in the US or just traders being very indecisive and emotional. When I traded the YM, I never really paid attention to the dom (only tape) so can not comment on this behavior for US futures.

[brownsfan019 17]

James,

My observation of price gravitating towards these was just that - an observation. I could be wrong. This is not something I've studied or looked at with any regularity, so who knows.

 

It is interesting to watch and if there's a way to make money from it, I'm sure someone is doing it. I've personally never seen a profitable system or trader do this, but it would be neat to watch if done successfully.

 

If nothing else, this thread should serve as a reminder to everyone, esp newbies, that many, many games are played on the DOM's in the US markets.

[AbeSmith 10]

Very interesting post Brownsfan. I'm reading Schwager's The New Market Wizards and what you describe sounds familiar to something I read there but I don't remember the specifics. Right now with my trading I'm getting to a point where I'm starting to pay more attention to the DOM. On the YM sometimes there are orders over 100 and those orders stand out. I like to see those orders on my side of the trade, but since I don't have enough experience watching how these big orders play out I'm not willing to trade off of them unless there is another reason for the trade.

[brownsfan019 17]

Very interesting post Brownsfan. I'm reading Schwager's The New Market Wizards and what you describe sounds familiar to something I read there but I don't remember the specifics. Right now with my trading I'm getting to a point where I'm starting to pay more attention to the DOM. On the YM sometimes there are orders over 100 and those orders stand out. I like to see those orders on my side of the trade, but since I don't have enough experience watching how these big orders play out I'm not willing to trade off of them unless there is another reason for the trade.

 

Abe,

I suggest you study and study some more on how to use this in your trading, if at all. In my casual glances at it, as I've suggested in this thread, there's so many games being played that trying to use that info to trade off of is dangerous in my opinion. Again, I have not done nearly as much research on this as other things, so there could be some good stuff there. Let us know what you find out, if anything, about trading with the dom #'s.

 

FYI - what could be of help to you is the OEC dom. They have a total bid/ask thing in the settings where the dom will constantly add up the bids and the asks that you see at the bottom. It's interesting to watch, but it fluctuates so much that I didn't get much from it.

[Guest Fulcrum]

What I've noticed here is that when you see heavy buyers or sellers sitting, they can act like a magnet. Price seems to gravitate towards them.

 

Now the question is why... why does price want to gravitate there (if it in fact does on a regular basis)? Are trades being filled there or do 'they' know that 'they' can create artificial pressure?

 

The above post I put was a great example. There appeared to be heavy sellers a few times and price has continued to rise. At first glance, it would seem that there was some possible resistance there; however, that was not the case at all...

 

It would be interesting to see some documented research on this topic. Is there really something there to use? If so, could it be used in a discretionary approach or would this require ultra-fast timing by computers...

 

Just some ideas, a little talking out loud here.

 

 

Ah....yah!

 

Price tends to trade towards size....it is about moving price to where the INVENTORY IS for distribution or accumulation. Have you read any of the ACV threads...ViperSpeedTrader points out this historically known action of the markets quite well. If the 5 levels of the DOM bid/ask can hold a ACV ratio of 2:1 or greater for a continuous period (not on-off, on-off activities)....then you can see many times price TRADE TO the size. I use this information ALL the time when I am looking at trade signal set-ups near MP levels. You need to get ACV ratio information displayed on your DOM to track this.

 

 

Fulcrum

 

 

Great ACV thread..... http://www.elitetrader.com/vb/showthread.php?s=&threadid=68098&highlight=ACV

[brownsfan019 17]

Ah....yah!

 

Price tends to trade towards size....it is about moving price to where the INVENTORY IS for distribution or accumulation. Have you read any of the ACV threads...ViperSpeedTrader points out this historically known action of the markets quite well. If the 5 levels of the DOM bid/ask can hold a ACV ratio of 2:1 or greater for a continuous period (not on-off, on-off activities)....then you can see many times price TRADE TO the size. I use this information ALL the time when I am looking at trade signal set-ups near MP levels. You need to get ACV ratio information displayed on your DOM to track this.

 

 

Fulcrum

 

 

Great ACV thread..... http://www.elitetrader.com/vb/showthread.php?s=&threadid=68098&highlight=ACV

 

Interesting Fulcrum, thanks for sharing.

 

If you have info to add, please do. It would be interesting to be able to break this down more to be able to use it meaningfully. As I said, the bid/ask totals change so quickly that I find it hard to read but haven't done much with it. If you have some guidelines or rules to share, that would be great.

[darthtrader 10]

Very interesting elite trader thread. Makes me sad to see how far elite has fallen. Is this stuff really only good for scalping though? I have to finish that thread but I'm not sure it sounds like you would be able to get all that much better trade location if your doing anything more than a scalp. Interesting to read how powerfull neoticker is in that thread too. This could be really interesting on nikkei futures if these games are illegal there.

 

I've watched the CBOT gold book before, if you want to see really absurd games check that out.

[darthtrader 10]

check out Dcraigs charts here

http://www.elitetrader.com/vb/showthread.php?threadid=68098&perpage=6&highlight=acv&pagenumber=17

 

Very interesting charts. I think that is the first time I've ever seen Ehlers DSP ideas put to use that it actually looks usefull. That FIR filter looks to really be smoothing out the book delta candle information nicely.

[Guest Fulcrum]

No problem Brownsfan!

 

I use ACV (as an additional filter) when I am about to trigger a new entry order from a signal generated by one of the several systems that I trade. If I am about to take a trend reversal type trade, and the ACV is 2:1 or greater in the opposite direction of my entry, I will hold off and wait. If the ACV is 2:1 or greater in the intended direction of my trade, I will take the trade with increased position size (about 50% greater position size). I scale out the added position size as price travels up to the tick levels creating the predominance of the 2:1 affect....or until I see the 2:1 affect neutralized (the remainder of my position I leave on with my normal parameters).

 

This type of trade set up I have found has a very high probability factor...well over 70% success rate. The other set up I use a lot when I observe the ACV at 2:1 OR greater, is when price is at a very key s/r (or MP) level. When I see the ACV go 2:1 or > in the direction of a breakout (through support or resistance) I jump in with a scalp play for 4 to 6 ticks....works like a champ as price busts out with momentum.....leave some runners on these trades as price can really move when this happens.

[Guest Fulcrum]

BTW, the day in Feb when the market blew out, I had 4 HUGE ACV trades as price in the ES kept blasting through major MP levels (the ACV was telling me to play the breakout through support on all 4 levels that day). My first SHORT trade I made 6 ticks with no runners (dumb me)....the last 3 SHORT trades I made 6 ticks with my primary position and over ten points total with the runners. Price would just jump away from my entries and never look back...that was a fun day.

[Guest Fulcrum]

check out Dcraigs charts here

http://www.elitetrader.com/vb/showthread.php?threadid=68098&perpage=6&highlight=acv&pagenumber=17

 

Very interesting charts. I think that is the first time I've ever seen Ehlers DSP ideas put to use that it actually looks usefull. That FIR filter looks to really be smoothing out the book delta candle information nicely.

I agree...dcraig has a nice analysis of the situation with his charts....smart trader imo.

[brownsfan019 17]

Fulcrum,

Can you elaborate on the 'ACV'? Maybe it's in the et thread that I didn't see and wondering if that's a standard charting platform thing or not. Where is this commonly found in charting platforms?

 

I'm curious to see how this looks in real-time as it's always been something in the back of my mind saying - looks like price is gravitating to that level, but then there's plenty of times when it does not as well. So I think just 'eying it up' is not a good idea.

[brownsfan019 17]

Fulcrum,

Tell me what you think of this - perhaps ACV could be used for position entry and/or position exit strategies. What I mean is, you trade the way you do now (I like candlestick analysis) and when a trade appears, you check the DOM to see how the ACV looks. If it's in your favor, you take the trade and based on how much in your favor, you could position size off of that - something like 1 to 1 = regular size, 2 to 1 = double, etc. Or some function of that.

 

It's late and after my Browns had a heart breaking loss, I could be looking at this incorrectly, so let me know what you think since it appears you use this in your trading.

 

I'm thinking that this could add a quick and easy filter for me in terms of my current setup, just helping with entries and/or exits.

 

My only concern is how to implement this in real-time. For example, if I get a long at 10:00am, right at that moment do I check the ACV (which for me would simply be looking at the OEC dom, which does have the ability to total the bid/ask columns) and if it passes, great and if not, just wait or not trade it at all. I'm just trying to visualize how this works in real-time.

 

Another example with numbers:

 

I get a long with price at 1500.00.

 

Right at that moment, the ACV is even = bid/ask basically the same. Can go long at 1500.

 

30 seconds later, the ACV is now bullish, but price is 1500.50.

 

Do you now take the trade b/c the ACV is bullish or are you already in the trade b/c your entry already appeared and just feel good that the ACV is behind you?

 

And then once in the trade do you remain in the trade while the ACV is in your favor and if so, for how long? How often do you watch the ACV develop? In other words, if I am long at 1500.50 and the ACV is nice while price is rising and for a blip the ACV is not bullish, do you flatten or wait to see if it was temporary?

 

As you can tell, this has my interest as I've referred to the idea of price gravitating towards the heavier volume as the 'magnet' - price is like metal and the heavier volume is the magnet.

 

I guess it all sounds great in theory, but as you can tell, I'm trying to see how this would play out in real-time. I think I'll at least put the numbers up on my OEC dom tomorrow and just see how it looks.

[darthtrader 10]

I'm also interested what software you are using Fulcrum.

 

From that ET thread though i'm sure this is not standard stuff at all. I think one guy said he wrote his own software and Neoticker can do it also because it can take snapshots of the book at 1 second intervals and then build the charts from that data it. Neoticker scares me...

[brownsfan019 17]

darth,

That's why I am wondering as well. I know OEC has DDE Excel functionality, so that may be an option as well, but how you quantify and when is something I am not sure of.

[AbeSmith 10]

Sorry guys if I'm repeating what is already knows, but here is a good example of how I see the DOM useful. In attachment 1 you can see that there are several bids over 100 which stand out when price was dropping this morning, at 13908, 13906, 13901. When I see that I ask, what else makes those numbers significant. 13908 is the 200SMA on the 5 minute chart which is a significant support resistance point. 13906 is one point above the PP pivot for today. And 13901 is Friday's close. And sure enough, price hit a low of 13897 and then climbed. It might seem a bit of a falling knife situation to try to cash in on these, but it seems to me that if it is not a major news type of decline there should at least be some bounce from these points, 5 or perhaps even 10 points, even if you are wrong about the overall direction. So if you take a big portion off at 5 points and 10 points then you might get a free trade, or make some money if you move up the stop a bit, even if you are wrong about the overall direction.