DOM ACV and bid/ask WALL used tgether

Discussion in 'Strategy Development' started by RedDuke, Sep 6, 2007.

  1. RedDuke


    Most of the people on this forum heard or read about ACV (accumulated volume) and Wall (large) size on bid/ask appearing on the DOM.

    ACV was introduced by VSTscalper in the thread “Scalping_My Way with ACV”. Wall was introduced by Jack Hershey in numerous threads, and was/is discussed in Spyder futures thread.

    The concept of ACV is that when bid/ask ratio (5 levels of bids and asks in DOM added) is 2:1 or greater, the price will move towards larger side. Which is a bit counter intuitive because one would think that large size means that the resistance will be stronger, and therefore the price should bounce of it.

    This is where WALL (large size of contracts on 1 or 2 levels of DOM) comes into the picture. The idea behind using the wall is to see what happens to the price when it touches the wall. If it can not penetrate the wall, that means the change in price direction is taking place and therefore either reverse the current trade in that direction or establish a new one.

    One of the things that needs to be monitored is when the wall disappears because orders are cancelled, Time and Sales can be useful as it shows all actual trades.

    At first glance ACV and WALL contradict each other. But I found and interesting way to use them combined. If the price penetrates the wall, in the direction of higher ACV ratio (at least 2:1), the momentum is very strong and the probability of the trade continuing is very high. If however the wall holds, then the momentum is in opposite direction since wall and higher ACV act as resistance.

    Let’s discuss this further. It would be interesting to hear other thought and ideas.
  2. acv is a excellent topic....good thread!

    I find acv is most helpful for me near primary s/r levels and the 2:1 ratio's can be found and exploited for entries countertrend at reversal price pivots.
  3. C99


    Good topic. I've been trying to resolve these two in my head as well. On their own they both make sense, but together they are in conflict. Busy now but I'm going to come back to this.
  4. plodder


    Can you quantify this in any way? A formula? Many have access to the dom numbers and they can change faster than people can perceive them, so an algorithmic look at these numbers may be in order.
  5. RedDuke


    Yes, it can be programmed. Creating an algorithm (indicator) is my goal. The technology is present. My choice is NinjaTrader .net environment. However, I am still trying to formulate rules for this. Also, there is currently an issue with accessing time and sales in ninja.
  6. plodder


    But if you program something for the dom, do you have to mess with time and sales? Just look at volume and last price.
  7. RedDuke, good luck to you. Maybe your eyes are younger than mine. I spent an afternoon eyeballing the ACV concept with NQ, and I swear to you that the accumulated bid or ask only builds up a split second AFTER price moves in its direction.
  8. ACV is not as useful on the NQ and YM as other products. I use it on the ES, ER2, and the DAX most often. It will telegraph breakouts as well as new price pivots at key intraday price levels.
  9. Tradestar, thanks, but how come? Plenty of liquidity in NQ. What's diffunt? Ah doan no nuffin' bout dem udder contracts. Is it the lacking of Jacking? Not much evidence of SCT trading on NQ yet, thank goodness.
  10. I think the more commercial interest in a contract then the more frequently you will see ACV ratio's that get to 2:1 or greater. How many little guy traders put on size to attract inventory at key price levels? :)
    #10     Sep 6, 2007