i use support resistance to enter trades but looking into learning to read dom for better entries . IS dom trading worth taking the time to learn ? Has any one here trading improved buy learning to trade from the dom ?
like if there is a fake breakout over a resistance line and it retraces can you tell any better from the dom that it was a fake break out from the orders
Due to algorithms...in my opinion trading via the DOM (depth of market or market depth) is no longer adequate. I hear people once in awhile talk about the DOM but I haven't met anyone in about 5 years that actually uses the DOM to help improve their entries or exits. I'm sure there's some traders out there that still believes in it but its not like it was in the 90s when trading via the DOM was popularized by traders, brokers and charting services. Those few that still use the DOM for trading...they're doing such as scalpers.
DOM - Trading is still viable, but as WRB said, it's mostly about scalping. Guys who are like "it's all algo's and fake orders" simply don't know what to look for. If some guy needs to dump 10.000 FGBL in the next 5 minutes, he will have an exploitable impact, algo or not. But do not think it's an easy road. Prepare to spend about 3-6 months watching your market every day to get an idea what's going on. Keep in mind that every market is different, so the patterns and algo's you see in the treasuries don't necessarily translate to corn or gold. It's because there are different players in corn opposed to - lets say - bonds and a farmer or big elevator might trade differently than a local bank or fund hedging interest rates. Choose one! market and stick to it. Stay away from CL and ES. Dont look at any charts for the first month. - Keep a volume referrence point (mine is 1/2h after open) and note how many contracts traded at that point. This will give you an idea about how active the day is going to be. - Use a Time&Sales window to see how big the clips are. 500 cars in ZN are doing nothing, frequent 1k - 3k trades means that bigger money is trading and they move things. Keeping track of volume and clip size is very important. When you lean on a price and there is no activity, you might get one tick. If people want to play, you get 5 ticks from the same setup. So if you understand just that, it will make you more profitable with your support/resistance stuff. It's easier to fold it for the day when you see with your own eyes, that nothing's going on - In the beginning, don't pay too much attention to the limit orders. Take a notebook and write down the prices where you saw a lot of volume and big size. Do this for a week. Like if your market tickles down 5 ticks on low volume and size and suddenly tape speeds up, clips get huge and one or two prices trade a lot of volume. - After a while of watching your market, you will find that when big size transacts, they are doing it in similar ways. This is where you start to look for edge after you looked at your market for a couple of weeks. E.g. I've seen some reverse spoofs in ZB, but never in ZN where there are more drilling algos. - Get camtasia or screencastomatic and record every session. Review the prices that traded a lot of volume and check if you can find any patterns in how big trades are executed. If you do, congrats, you have edge. As said, don't expect it to come to you quickly. Most likely you won't be able to focus for more than 10 minutes in the beginning, keep on trucking and you will get a good understanding of how markets operate, even if you decide to keep trading with charts.
The DOM is a very useful tool short term if you have experience. Basically what you are looking for is how the limits (passive traders) react to the markets (aggressive traders). Algo's ? pffft. You concentrate on the three or four levels closest to price. Watch for pulling or stacking of orders. Watch for reloading (aka icebergs). Standard DOM's such as the one included with Ninja Trader will be very difficult to use. I suggest looking at Jigsaw tools. They have a very useful educational series on the DOM (free) at https://www.jigsawtrading.com/learn-to-trade/free-order-flow-analysis-lessons/
I wanted to pop this up. How do you scalpers use the DOM? Can we have a discussion about it? do many of you use TT? Es
It’s not really an either/or thing. One sweeps through a variety of market displays from longer to shorter timeframe charts, seeing a possible turn coming up, sweeping through the DOM, T&S and OTR of the ES and YM. YM leads the ES at turning points. It takes a while to synchronize and calibrate. Once the pieces come together it’s similar to driving a car - although too much for incredulous fossilized minds. Why handicap oneself? Much better results can be had when utilizing use all available resources appropriately.