Watching the livestream this morning. As I understand it, the theory is that the market will tend to move towards and reverse at areas of high liquidity (displayed by the red zone in the heatmap). Just recently, that was the 5273.75 level on ES: So far, so good for at least a pause and a minor bounce: Current high liquidity area above would be 5278.75.
It seems to me like it there were also levels at 5281.25, and 5280, but those easily broke. This is what I was going to comment earlier, but was curious to see if anyone else actually had something good to say. These areas sometimes are magnets and price bounces off them, and sometimes price just trades right through them. I still watch this because my platform gives me this same indicator, but I cannot make any concrete decisions with this data. Its a coin toss as to whether to take a trade hoping the levels hold or not. Plus, what your chart shows is somewhat misleading because it adjusts the colors based on the amount of resting orders at the time. The red lines during slow periods might only be 100 contracts at a level, but other times, it might represent 1000 contracts. It makes it looks like these levels are far more important than they are. I specifically see in the first chart a level that is red at price 5274 with 239 contracts. But when you watch volume, 239 contracts can trade in only seconds. So then I have to question how important is it to show 239 contracts waiting at a level when this amount of volume can be absorbed at any time without showing any size. So if you add up all the volume that is shown in resting bids, but then look at how much volume actually transacted, you see a huge difference. Its not like in real estate where all of a sudden, if 100 extra homes in your area are on the market, this is a big deal because it will be difficult to absorb 100 homes for purchase when there were only 50 homes initially available. I think the RE industry uses some metric which tracks how many months of inventory there are. If 20 homes sell a month, an initial volume of 50 listings would be 2.5 months of inventory. But when another 100 homes come on the market, that is an additional 5 months of inventory, which is a big deal. With the ES, seeing a huge bid or offer of 200 contracts might be 3 seconds of inventory... LOL As someone said earlier, iceberg orders and such are way more interesting because in T&S, you can really see where the heavy trading was, but the size that is shown in the resting orders via level 2 is minuscule. And even if it was significant, you still have to decide if you will fade it or not. During trend days, even single "wall" of heavy Ask prices is taken out on the way up, and then it just keeps climbing. So if I have to question if seeing a heavy bid or ask means I should fade the move or not, and chances are 50/50, its not any more useful than simply wondering is a round number like 5200 will hold, or if the previous day high or low should be faded, etc.
%% LOL, well ok fine if its 50% plus penny I try not to cancel order$ much myself, but happens more than exits ; so i watch entries \exits more than colors which i use . Good shooting to you,
Bruce who made Bookmap is not a good trader. No one heard about him as a trader. It tells everything.
We use and offer Bookmap. Excellent platform for day traders. Lots of features. Happy to help withy any specifics.
What is your thought process? It seems to me like there are several combinations. You see a very thick price level far away. Do you come close to that price so it will act like a magnet? Or do we not come close since we will front run the rejection? What if a very thick level appears just a few ticks away but then this order is quickly pulled? Does this mean we can now trade through the the price since there is no wall to overcome?? My analysis after watching this for years is that there is no edge. Sometimes thick levels act as a magnet and price bounces off, and sometimes price trades through. The best you can do is be aware of the level and then see the price action around this level and then decide. But it's no different than any other level or potential area for price to reverse. If price is at 4515 and a huge bid shows at 4510, there is no guarantee that we go down to 4510, or maybe start rallying right away. And if we trade down to 4510, there is no guarantee that 4510 will hold of break through. So if a trade cannot be entered based on thick levels of shown liquidity, it's kind of useless.
I tend to agree with , yet I have clients who like the tools and use the order flow and it is their main tool. I personally think that order flow is a bit too much noise in some ways and prefer other methods as primary and order flow as secondary. Every trader is different....
Even though I just knocked it, I still have it on my charts as well .. lol... But I wonder if it's more of a hindrance. I love seeing the thick levels, but it doesn't help the decision making process.
And they're making $$$? For me, it would be nothing but a secondary tool to add more granularity in my analysis/view. And some people drive a car for years and still ain't a Formula1 driver... I appreciate your critical view, but I also think it may be too simplistic. I'm sure there's a lot more nuance to trading order flow than simply watching for thick levels of liquidity. At least that's my impression from studying it cursorily. I'm still not convinced there's much to be gained from watching level 2 data for thickly traded index futures, but I keep an open mind.
Bookmap has some good videos and I believe they have live trading sessions. Other than time and energy not much to lose if you want to explore....