Reading Depth of Market

[Gekko78 10]

Our point exactly.

 

I would like to set and forget supa dupa computa to do my trading. My miserable attempts at this failed - I am sure others can do it better than I.

 

I asked if it could be back tested - because if it cant then its much the same as many methods.Instead, we learn to read, and interpret, context and patience, then order management - and no one method of reading the same information is better/worse than the other IMHO....

Otherwise if it had the repeatable, clear edge then let the computer read it - it will be likely faster and better than any of us.

 

A lot certainly has to do with time frame and style - in this case day trading as a scalper. For some with a longer term time frame I am sure in the right context, near support/resistance, at what might be deemed a cyclic turning point and with an unrelated stop loss, a MA cross over might be a great way to simply enter without worrying about much else.

 

I agree , I did mention in another post somewhere and I should have clarified it here as well that this method is a scalping method........Usually 2-3 ticks at a time on said instrument. Order flow trading is not really meant for anything or than that.

 

If you are trading of dailys or 4hrs or something then I absolutely agree with you . I have never known anyone to use order flow for trading of higher time frames so I just figured it was implied. ....my bad

 

[Gekko78 10]

No one is saying that what you are doing does not work, and I do not think people are really misinformed. Yet, you are saying that other things won't work:

 

 

 

That is an ignorant position to take, and you will be humbled for being so close-minded about what is most important in successful trading. And what's most important in successful trading has nothing to do with order flow.

 

My charts consist of: footprint, 500V, DOM/TS, 3000/10000V, market profile, 30000/50000V, TICK, and then small reference charts of the 10y, spx, ndx, djia, euro, and dax. I don't have any candles, I only use hilo bars (see my thread "The Close of a Bar is Meaningless" to see just how much I hate traditional intraday candle views). Check the "Day Trading the Emini Futures" thread a few months back (one of my last posts there) for a footprint chart I annotated highlighting how I used it to make trading decisions.

 

I say all of this to say that I am far from "traditional" in my approach, and I rely HEAVILY on order flow to make decisions (in fact, I really have no other way to really read the market). But you are saying that price information alone is not enough to form an edge so as to be able to put capital at risk. But large, huge investors do it every day, with more money than you can possibly ever hope to accumulate, and I guarantee you they don't give a rat's ass about order flow. It works great for you, it works great for me, but it doesn't have to work at all for everybody.

 

Thank you Market Wizard Please see post # 76 for response.

[joshdance 10]

Thank you Market Wizard Please see post # 76 for response.

 

Insulting me with a sarcastic "Market Wizard" user title which I have no control over makes about as much sense as if I were to call you "Mr. 40% Trader IQ" which you have no control over. It seems we agree on quite a lot, and even if we don't, that's what makes a market, so no need to prolong this discussion.

[Gekko78 10]

Insulting me with a sarcastic "Market Wizard" user title which I have no control over makes about as much sense as if I were to call you "Mr. 40% Trader IQ" which you have no control over. It seems we agree on quite a lot, and even if we don't, that's what makes a market, so no need to prolong this discussion.

 

I just find humor is the "market wizard" title . Not for you personally but for anyone.

[zdo 20]

Gekko,

I've been skimming your DOM posting for a while now and I think you’re getting resistence because

1) you really are ‘selling’ DOM trading ( with some payoff that doesn’t involve getting any dollars commission, btw ) You’ve asserted that it is the ‘only/best way’, (and …to your credit) you have also said it’s not the only way. Ie You’ve been emphatic … then you back away. and

2) But no where have you explained it in terms of interests and aptitudes… and I think that omission is the underlying cause of the challenges you are receiving to your assertions. Ie Many traders would choose to work a 9-5 job rather than try to game an ever changing stack of digits – even if the colors vary agreeably (and Predictably ) ….

 

You’ve threatened to stop ‘selling’ it – http://www.traderslaboratory.com/forums/futures-trading-laboratory/15717-why-futures-better-12.html#post175488 and haven’t. …I think the tone of the challenges, etc. would significantly dissipate if you were to open a “Ask any DOM related question” thread …and mean it.

 

but…If you were to open a “Ask any DOM related question” thread, would you care enough to go beyond the single, well duh, pabulum answer to questions.

Earlier I asked you to “describe some of those differences in how they behave” and all we got was “CL is a very thin market” …

manipulation is clearly visible

For you, is manipulation as 'clearly visible' in CL ? (or treasuries ? etc? ) ... and how?

 

Would you go for the same number of ticks in CL?

 

…other differences ??? thanks.

 

and re "... 2-3 ticks at a time ...Order flow trading is not really meant for anything or than that"

Really? Categorically ??

 

...

 

However, if you wouldn’t care enough to start the thread and go beyond pabulum answers… then I guess just keep ‘selling’ ...and getting resistance… with rapidly decreasing returns for everyone… jmo

 

zdo

[Gekko78 10]

Gekko,

I've been skimming your DOM posting for a while now and I think you’re getting resistence because

1) you really are ‘selling’ DOM trading ( with some payoff that doesn’t involve getting any dollars commission, btw ) You’ve asserted that it is the ‘only/best way’, (and …to your credit) you have also said it’s not the only way. Ie You’ve been emphatic … then you back away. and

2) But no where have you explained it in terms of interests and aptitudes… and I think that omission is the underlying cause of the challenges you are receiving to your assertions. Ie Many traders would choose to work a 9-5 job rather than try to game an ever changing stack of digits – even if the colors vary agreeably (and Predictably ) ….

 

You’ve threatened to stop ‘selling’ it – http://www.traderslaboratory.com/forums/futures-trading-laboratory/15717-why-futures-better-12.html#post175488 and haven’t. …I think the tone of the challenges, etc. would significantly dissipate if you were to open a “Ask any DOM related question” thread …and mean it.

 

but…If you were to open a “Ask any DOM related question” thread, would you care enough to go beyond the single, well duh, pabulum answer to questions.

Earlier I asked you to “describe some of those differences in how they behave” and all we got was “CL is a very thin market” …

 

For you, is manipulation as 'clearly visible' in CL ? (or treasuries ? etc? ) ... and how?

 

Would you go for the same number of ticks in CL?

 

…other differences ??? thanks.

 

and re "... 2-3 ticks at a time ...Order flow trading is not really meant for anything or than that"

Really? Categorically ??

 

 

 

 

However, if you wouldn’t care enough to start the thread and go beyond pabulum answers… then I guess just keep ‘selling’ ...and getting resistance… with rapidly decreasing returns for everyone… jmo

 

zdo

Selling?? Nah ....... I assume you mean selling my philosophy as opposed to some product. Perhaps what you call selling I call giving out info......these are the fundamental ideas that were taught to me so I am just giving them here...but not trying to teach anything.

 

As far as opening another thread .............Not bloody likely.

 

There is enough info on the other threads, and this one, that I have posted to give someone an "idea" of how it works.....anything beyond that they can PM me or Google it.

 

I am not a teacher of any kind and do not care to be ........the only reason this whole thing started was that someone said DOM and order flow trading gave no edge as opposed to charts.....I disagreed and have shown many things that demonstrate this.......but alas, the "resistance" as you call it keeps coming in.

 

I only respond to something when I see the information is inaccurate not wrong( there is a difference)

 

Its cool though I belong to some other forums where this information is not only known but talked about regularly in the same way that I do ( I can already hear it " so why don't you go there!)

 

I think I have done enough of explaining myself here............

 

Let me be perfectly clear yet again so I do not get attacked for this as I have already stated this many many times in other posts but somehow people miss that part of my post.

 

Order flow trading in not the only way to trade , there are other ways to be profitable ....

 

There now everyone can stop saying that I keep saying that this is the only way to trade and all other methods suck and I have the keys to the kingdom or that I am awesome or anything like that.

 

I only respond when I feel info is inaccurate. I have never started a conversation out of the blue on order flow trading anywhere in this forum.

 

Like I said if anyone wants the info they can find it........

...

[DbPhoenix 42]

On the other hand, you "do not see how one can trade successfully , for any extended period of time, without using order flow , DOM and T&S." Those who have been at this for a while have attempted to show you how one can.

 

Seems like a wash to me.

[Gekko78 10]

On the other hand, you "do not see how one can trade successfully , for any extended period of time, without using order flow , DOM and T&S." Those who have been at this for a while have attempted to show you how one can.

 

Seems like a wash to me.

 

New response to all further questions regarding other methods , profitability and such ...... see post #81

[kuokam 10]

Let's wrap things up in search of THE TRUTH some where between all the opinions here :

 

1- provided you know how to read it, the DOM is a must for ultra short time scalpers

2- swing and long term traders can completely ignore the DOM and trade successfully on TA + indicators.

[sdoma 10]

Let's wrap things up in search of THE TRUTH some where between all the opinions here :

 

1- provided you know how to read it, the DOM is a must for ultra short time scalpers

2- swing and long term traders can completely ignore the DOM and trade successfully on TA + indicators.

 

Define swing traders. What time frame are you thinking about? Also, I'd challenge the idea that only ultra short time scalpers need to read the DOM, I think any intraday player needs to invest heavily in learning that skill.

[kuokam 10]

I was just trying to reach a consensus for us to move forward. If you know better just tell us. You are not my teacher to be asking me to define this or that. Go ask Mr google or your dictionary. If you include all the intraday traders, the other (higher) time frame traders remain. Tell me their use of the DOM?

 

 

 

Define swing traders. What time frame are you thinking about? Also, I'd challenge the idea that only ultra short time scalpers need to read the DOM, I think any intraday player needs to invest heavily in learning that skill.

[Gekko78 10]

I suppose if I ever did use a chart to trade off of , this would be the only way I would do it.

[sdoma 10]

I was just trying to reach a consensus for us to move forward. If you know better just tell us. You are not my teacher to be asking me to define this or that. Go ask Mr google or your dictionary. If you include all the intraday traders, the other (higher) time frame traders remain. Tell me their use of the DOM?

 

Your teacher? Who says I'd bother with you? I was just asking you to define yourself clearly. Most people think they're being much more clear than they really are. I asked you to define a swing trader because for some people, a swing trader can be an intraday trader. For others, they trade swings anywhere from a few days to a week long. It's just one of those things that people tend to define differently.

 

But hey, I don't say THE TRUTH in capital letters either. Maybe I just don't understand you. My point was that even traders who are going to keep their trades on a few days will often read the order flow to execute, especially with size.

[kuokam 10]

Which one does Warren Buffet use? TT or Ninja?

 

Your teacher? Who says I'd bother with you? I was just asking you to define yourself clearly. Most people think they're being much more clear than they really are. I asked you to define a swing trader because for some people, a swing trader can be an intraday trader. For others, they trade swings anywhere from a few days to a week long. It's just one of those things that people tend to define differently.

 

But hey, I don't say THE TRUTH in capital letters either. Maybe I just don't understand you. My point was that even traders who are going to keep their trades on a few days will often read the order flow to execute, especially with size.

[DionysusToast 10]

Let's wrap things up in search of THE TRUTH some where between all the opinions here :

 

1- provided you know how to read it, the DOM is a must for ultra short time scalpers

2- swing and long term traders can completely ignore the DOM and trade successfully on TA + indicators.

 

Probably about right but I think the arguments will come when you start talking about position day trading.

 

There's also no mention of spread trading, which shouldn't be omitted from the list either.

[kuokam 10]

Hi Dionysus!

Certainly, there will be "grey" zones, and IMHO any position to be closed within the day is best adjusted thru the dom, at least for entry.

 

I have learned a lot on your site and will continue to go thru the wealth of resources you offer there, thanks for that.

The one thing I am now willing to have my eyes on is a video on how to use the dom during main releases (nfp, cb rate change...). Given that all news affects the dom first, I hope I can find a posting in that domain.

So far still searching. If you have an idea, please let me know, since you are in contact with almost all the dom planet.

 

 

Probably about right but I think the arguments will come when you start talking about position day trading.

 

There's also no mention of spread trading, which shouldn't be omitted from the list either.

[DionysusToast 10]

Hi Dionysus!

Certainly, there will be "grey" zones, and IMHO any position to be closed within the day is best adjusted thru the dom, at least for entry.

 

I have learned a lot on your site and will continue to go thru the wealth of resources you offer there, thanks for that.

The one thing I am now willing to have my eyes on is a video on how to use the dom during main releases (nfp, cb rate change...). Given that all news affects the dom first, I hope I can find a posting in that domain.

So far still searching. If you have an idea, please let me know, since you are in contact with almost all the dom planet.

 

Personally, I'd steer clear of the releases. If you want some excitement, watch the DOM on the ES right after the open. It is quite common for one side to absorb a lot of market orders within the first few minutes. It gets to a point and there is so much liquidity there that it moves away. It's good for a scalp, sometimes more. Many people would say it's a terrible time to trade but I've had trades in the first 20 seconds. There's probably a good reason this occurs, if you watch it, you'll see it.

 

For news though - I don't bother, the liquidity thins out up to the release going from 1-2000 at each level to just a few hundreds. There is a case for fading the area you expect liquidity to exist but to be honest, it's a bit to wild for me.

 

In terms of position day trading, the reason I mentioned this is that the game is slightly different. When scalping, the depth itself is pretty important because you try to take advantage of the gameplay that occurs at times. For position day trading, the flow of market orders is more important. It is for me anyway.

[kuokam 10]

I'll try that experience at the ES open.

 

When you say the flow of the market orders is more important for a day position, do you mean you need a more active market than when scalping ? I thought the depth is always an important ingredient to guesstimate the ensuing trend. But you never know if a price will follow a direction for the next 30 seconds or the rest of the day. But you probably have an idea around that?

 

Personally, I'd steer clear of the releases. If you want some excitement, watch the DOM on the ES right after the open. It is quite common for one side to absorb a lot of market orders within the first few minutes. It gets to a point and there is so much liquidity there that it moves away. It's good for a scalp, sometimes more. Many people would say it's a terrible time to trade but I've had trades in the first 20 seconds. There's probably a good reason this occurs, if you watch it, you'll see it.

 

For news though - I don't bother, the liquidity thins out up to the release going from 1-2000 at each level to just a few hundreds. There is a case for fading the area you expect liquidity to exist but to be honest, it's a bit to wild for me.

 

In terms of position day trading, the reason I mentioned this is that the game is slightly different. When scalping, the depth itself is pretty important because you try to take advantage of the gameplay that occurs at times. For position day trading, the flow of market orders is more important. It is for me anyway.

[mickeybh 10]

Two sites that will help tremendously.

Zigsawtrading.com (google it).

 

Nobsdaytrading.com

 

after completely reading all these sites get the zigsaw DOM use the footprint chart and be prepared to put in a lot of screen time. simulate trade until its cllicking. I estimate anywhere from 100 to 200 hours, if it isn't happening then reading the tape aint for you. Those hours will get you to the live trade part then keep improving. It's a tough game, but once you start seeing it you'll understand what makes the market tick (no pun intended)... LOL

[mickeybh 10]

Well indicators definitely lag, but indicators are very recent in technical analysis and do not define it, regardless of what the kids think. If a T&S display of one sort or another is being used on one side of the comparison against some indicator or other then of course, the indicator is past and the display is more current. But nothing one sees on a display is "is".

 

 

 

Most of that came to a head and got squoze. Maybe you could help bring them back to life, or think about creating new ones. Though I don't think the emini daytrading thread is salvageable. That went way off course almost from the start.

 

There is an is. The resting orders is (are) the resting orders. When the market orders hit them they react and become is again. It is this interaction that one reads, thus reading the tape. Comparetively on a chart you just see a line going up and down. When that line sits still for 10 seconds it could be because no trades happened or because 1500 contract just hit the bid and noone hit the offer. That's is what happened. That's valuable info (to me at least).

[kuokam 10]

Hi Mickey what makes you preffer the foot prints over the cumulative delta?

 

 

Two sites that will help tremendously.

Zigsawtrading.com (google it).

 

Nobsdaytrading.com

 

after completely reading all these sites get the zigsaw DOM use the footprint chart and be prepared to put in a lot of screen time. simulate trade until its cllicking. I estimate anywhere from 100 to 200 hours, if it isn't happening then reading the tape aint for you. Those hours will get you to the live trade part then keep improving. It's a tough game, but once you start seeing it you'll understand what makes the market tick (no pun intended)... LOL

[kuokam 10]

Totally agree there are levels you must monitor closely when day trading. Problem I have and which makes me hesitate and miss trades at times is that there are so many levels where reversals/retracements can happen: past days/weeks lows, highs, open, closes, pivots...Do you have any criteria to guess ahead of time the level most likely to hold ?

 

Well really my point the whiole thing was that a slim edge is all one needs to be successful.

 

Perhaps you do not know enough about it to make an honest statement. You know that whole " you don't know what you dont know" stuff?

 

 

I was trying to show that difference in those 2 charts I posted. Candles are nice , they look nice on a chart and the colors are nice to. But, that information alone is not enough to make a well informed decision about whether or not to put capital at risk.

 

Like I mentioned before I look at a chart every mornings for about 5 minutes to see where the key levels to look for are but that's it, I'm glad that most people use charts to trade with it helps me more. When I see price coming to these key levels and I only see 2-5 lot orders coming through trying to move price higher I know that is the very people I am talking about. I will fade because the guy who is taking the other side of those trades is who's side I want to be on. A candle cannot tell me that.

 

When price gets to said levels I look for what Is really happening there ,who is hitting into the bids , what size is trading there ? Should I fade the move because I see allot of bids being hit vs offered being lifted ? A candle going up and down and then closing at some arbitrary point tells me nothing other than it closed there.

 

I do not mind if people think that the way I do things is odd or that it won't work. Does

not bother me , but when people are misinformed about the info then I feel the need to step in.

[mickeybh 10]

Hi Mickey what makes you preffer the foot prints over the cumulative delta?

 

Cumulative delta shows you the delta for the entire session, and while you can obviously see the changes, I like to see the breakdown at the price levels over time. If we're at S/R or high / low, or congestion, then I can see the absorption and or buy or sell vol drying up. So as the market tests say a top over 5 - 30 minutes I'm looking for decreasing orders hitting the ask at the highs. That is hard to see on the DOM. If the reversal is quicker, often you'll see two to three price levels holding or absorbing the buying. Then buying decreases then the move down. So I use 3, 15 and 30 minute footprint bars to get the picture of the volume and watching the DOM to see the resistance of that volume put up by the resting orders. Because what's happening at 1400 (time) is totally different then what happened at 1000. Also I look at higher time frames in regular candles. Just for reference and I try not to allow myself to form a bias, easier said than done though.

 

BTW all of the posts that say watching the tape is worthless. It is the only way to trade. When the order flow changes price will follow in 80%. Now sometimes it reverses again 5 to 20 ticks lower (higher) but the volume has to be there and to the degree that the buying (selling) is taking out the offers (bids). Traders willing to trade higher (lower). Also are the bids (offers) pulling as price gets close. You see a 3,000 offer 3 prices above and buyers takes out the 2 levels and then that level with just 780 contracts. That 3,000 offer got out of the way. That's how I trade. Also watch the average size (I can see the orders hitting the tape so I get a sense that way), you'll see the lack of bigger orders as the market tops or bottoms.

 

There's a whole lot more to it (still learning) but getting the direction right is at least half the battle. I'm doing pretty good at the entries, now I need to work on the exits. I tend to get out too early. Lately I've been improving there, but you know once you have a 8 to 12 tick profit and it comes back half way its hard, I bail, then get back in. Out of a 10 point move if I get 4 to 5 out of it I'm happy for now. That's where the emotion hits me, when I'm 6 to 8 ticks down in a trade I'm calm. They will head fake and sometimes I double up averaging (goes against the rules but not convinced the rules are totally valid). Usually it's those trades where I make my money. So I'm doubling when others are getting their stops hit. We all have had our stops hit to the tick, got to be willing to put $500 to 600 on the line. My question is will I do it once I'm live. That's the question.

 

Goto Zigsawtrading. Excellent explanation of the 4-way auction theory. If you don't understand that the market is a 4-way auction, stick with the day job. And people that think the resting orders are meaningless. Well watch 10 to 20 thousand contracts trade into the bids in 5 price levels, they hold and see what happens. Get long, if moves down another 6 ticks and another 15,000 hit a smaller 2 to 3 levels double it. That's accumulation. Delta from 6,000 to -16,000 it's crashing, your stops are hit, you might get short, and boom up 25 ticks. If you're long and they break the first level and (where you entered) and the sellers are hitting it hard and the bids don't slow it at another 6 ticks, get out take the loss, don't chase, wait for another shot. If it holds (where you enter) I will often add to the position. So bassically I enter with half size then add the other half. Sometimes I don't get the chance sometimes I do. But a 6 to 8 tick winner is a good thing half size or whole size.... Oh yea winners thats the name of the game. No one has ever gone broke taking a winning trade down.

 

Now I'm not great by any means, and I make it sound easy, its not, but as I simulate trade the more I see it the better I understand it. The better I understand it the more confident I get. No confidence no profits, plain and simple. The DOM shows the excitement the footprint shows the volume distribution over time.

 

It's kind of like poker (yet its not), but when you get pocket aces, you feel pretty confident, can you get beat, yep, but if you bet and and take some guys out of the hand you increase your chances. That's kind of what you have to do here, take the jacks or better trades then make your bet and manage the trade, you'll find if you don't let the losers take a lot of your daily limit, take the winners down, have confidence you'll make money. And practice before you go live. I wish I had the technology and the education I have now 10 years ago.

 

I've tried tick bars volume bars and find that time bars are best. I can see price, I'm looking for what the vol is doing to make the price move or not.

 

Sorry about the wind!!! LOL happy trading, and hope this sheds some light.

[mickeybh 10]

You know I just joined in here. I've already had replies to my posts. This is GREAT. You know you read you think and you learn. I truely believe that a successfull trader's method is what gives that trader his confidence. I once read that the market goes up and it goes down, not complicated, pick you're trade and trade. That's obviously simplistic, but I often wonder how well one would do flipping a coin. Never tried it. When it gets right down to it it is all about probability. I've simulated now 100s of trades and I'm batting about 59% and am net up. So now I can say that the way I'm reading the market is giving me more winning reads then losers. So that's good. I'm controlling my losses. That's good. I know where I screw up, that's good. Will I improve, most definetly. So now I will go live and bring the confidence into that trading. Will I trade the same, probably not exactly, but if I keep the confidence and the stats and improve I will be successful. And that's the name of the game.

 

So if you trade charts, read the tape, follow the indicators of your choice, flip a coin, and it works and gives you the confidence to trade. Don't let any of this banter change you. If however its not working then read and try and practice. Remember the first time you rode a bike or drove a car. Now you can do those things with your eyes closed and one arm tied. So practice and confidence are the ingrediants. Has taken me many hours and a few dollars to learn this. Because I'm stubborn. BYE

[mickeybh 10]

Hi Dionysus!

Certainly, there will be "grey" zones, and IMHO any position to be closed within the day is best adjusted thru the dom, at least for entry.

 

I have learned a lot on your site and will continue to go thru the wealth of resources you offer there, thanks for that.

The one thing I am now willing to have my eyes on is a video on how to use the dom during main releases (nfp, cb rate change...). Given that all news affects the dom first, I hope I can find a posting in that domain.

So far still searching. If you have an idea, please let me know, since you are in contact with almost all the dom planet.

 

Correction the new effects the market, you may perhaps be able to see it on the DOM first or better. Quite frankly you are gambling when you hold a position at the news, let the big boys play that game, come in after things settle down.