After searching on this topic and found nothing I thought i might start a theard discussing how broker's order (at least in the pit) affect the direction of the market. I heard guys on the floor says sometimes as the market rally the deck of cards on the buy side gets thicker and thicker. Can someone who have spent time on the floor (either a pit trader or pit broker) explain how reliable as an indicator of paper's limit order on the market's direction? Is it really that visible of the whole supply demand picture just by looking at the resting orders in the book? Of course, on the screen the limit orders are all bs. But, does the pit's resting orders give a good picture? And lastly, how do you use the info that you see with those orders?
it sounds as if you are very interested in learning about Money Makers. who are your competition on the "floor" you are right in that it would make you a better trader. taking a class in this would pobably be helpful to you when finding an online university to teach you it would be good to know the experience (if. who for & how long the instructor traded for), of the instructor and amount they charge for each lesson. i learned from cybertrading university and found all of these credentials to be met. the beginners equity class will answer all of the questions you asked. it's a three week course and it helped me immensly.
in Trading and Exchanges Market Microstructure by Larry Harris, he has MM spead out in chapters 13,14,24, paybe it's too complex to post in few words.
if you are going to want to learn from some type of online university - only work with a location that also trades money for a living - for then they will be registered and you can look up how they really do in their disclosure documents - and if they do not have them - chances are you will be throwing a lot of good money away
It depends on what you mean by bs. Have you read the scalping with ACV thread ? It deals only with stock index futures, but "bs" is a wholly wrong way of looking at the DOM as is quite explicitly shown in that thread. You miss a lot if you ignore the DOM.
In your estimate how many percent of the contracts in the electronic book do you think is real demand? IMHO, the percentage of autospreading in the DOM is more than the real demand. And those autospread orders keep adjusting as the other side move. So, yes! I dont look at the DOM. I respect that you do, do you mind explaning how the DOM is useful to you?
See the attached chart of the DAX. Each bar is 200 contracts. The lower plot is a smoothed representation of the ratio of total contracts at the ask ( all 5 levels ) to total contracts in the book ( bid and ask at all 5 levels). The correlation with price is striking. This type of behavior is typical of all stock index futures that I have looked at, with the possible exception of the HSI.
For good measure here is ER2 (250 contract bars). The bottom plot is the difference of contracts traded at the ask and contracts traded at the bid. The limit orders visible in the book can be viewed as supply. The volume or better the bid/ask delta can be viewed as a proxy for demand. Four components - long supply/ long demand and short supply/short demand - see the ACV thread towards the end.