DOM Interpretation

Discussion in 'Index Futures' started by Grant, Jan 8, 2007.

  1. Grant

    Grant

    I'm trying to get a grip on the significance of price/volume and I need help and advice.

    Please look at the attached Word file containing a snapshot Depth of Market of the DAX future (if it isn't visible scroll up or down).

    What would be an initial assessment from the information presented?

    Which are the most significant elements?

    Is it bullish or bearish?

    If I was looking to buy, does the information suggest predominantly upward (buying) pressure?

    Or, if I was looking to sell, does the information suggest predominantly downward (selling) pressure?

    Any suggestions greatly appreciated.

    Grant.
     
  2. I just finished reading a fascinating thread on Market Depth. Dont have the link now but do a search.
     


  3. What would be an initial assessment from the information presented?


    The DOM by itself says two things.
    1. LONG price change is up (ie. 10 vs 56)
    2. It is IMMINENT, the instrument is running out of offers (ie. 10 vs 56)


    Which are the most significant elements?


    There are several actually.
    1. SUPPLY imbalance/bias
    2. Intra Bid/Ask Pair SUPPLY changes (ie. INCR, DECR, FLAT)
    3. The rate of 2
    4. Inter Bid/Ask Pair dominance (ie. latter vs former pair dominance/residence on your tick chart)
    5. OverAbundance/"Wall" (ie. B.Contract/B.Chart vs S.Contract/S.Chart) - this is where real/conventional resistance is actually "seen".



    Is it bullish or bearish?


    IMMINENTLY LONG. After several ticks (ie. 4560+), the SUPPLY favors SHORT. However, the tape would confirm which held. Additionally, knew SUPPLY information will get filled in on the left after the IMMINENT LONG arrives.

    If I was looking to buy, does the information suggest predominantly upward (buying) pressure?

    Or, if I was looking to sell, does the information suggest predominantly downward (selling) pressure?


    Pressure is on the TAPE! There is no volume reading on the DOM, just an indication of the direction from which volume can be taken from... Predominance is on a chart and is established by measuring the size of the herd of traders over some regular interval that are executing orders. The band of small herd size values informs you that the herd is imminent and will soon establish what is going to be predominant.

    BTW, what app is this???


    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1318735>

    Regards,
    MAK
     
  4. Grant

    Grant

    Bear and Mak,

    My apologies for the slow response to your posts, but in light of Mak’s info, I actually needed time to try and work out some fundamentals.

    After looking through around 45 search pages (“Depth of Market”), I gave up – 95% advertisements. I think I’ll broaden the search.

    The basic info seems obvious when you know. Part of my confusion arose from reconciling (and I stand corrected):

    the long (buying) side actually could represent SHORTS, eg a short is looking to buy to close or someone flat may want to get long (limit orders);

    the short (selling) side represents LONGS, eg a long is looking to sell to close or someone flat may want to get short (limit order).

    As I’m wring this, the conflicts are returning. Does the long side represent sellers (trying to close) or buyers’ orders?

    Do the quantity figures represent availability or wishes to but/sell?

    Mak,

    Thank you for your interpretation. Before I address your points, first I would rather clarify the above points, if that’s OK.

    Grant.
     
  5. Grant

    Grant

    Bear,

    Thank you for the link.

    I'll be back.

    Grant.
     
  6. nkhoi

    nkhoi Moderator

  7. Grant

    Grant

    Nikhoi,

    Excellent thread. Thank you for the reference.

    Grant
     
  8. jim c

    jim c

  9. Grant

    Grant

    Jim,

    Excellent stuff. Thanks a lot.

    Grant.
     
    #10     Jan 10, 2007