DOMs - At What Point Do They Become Overkill?

Discussion in 'Trading Software' started by cwb1014, Jan 17, 2006.

  1. cwb1014


    I've been reading various threads here relating to DOMs compatible with Interactive Brokers. I've also been visiting the websites of some of their vendors and reading up about them.

    I can see immediately how they would be invaluable if one were trading off of tick charts, multi-second, or 1 minute bars. I'm wondering though whether folks here who have significant experience using DOMs feel there's a point, as measured by the time frames one is evaluating (e.g., 5, 10, 15, 30 minute bars, daily bars), where they become overkill.

    Any thinking on this from experienced DOM users would be greatly appreciated. So that you'll know, I typically trade very liquid stocks (> $20 million avg. $ volume per day) and am generally evaluating 5 - 15 minute bars/candles in making my entry and exit decisions.

    Look forward to your replies.
  2. DOM is just a screen that shows you the Level II bids/offers. Why would it ever be overkill in itself?

    Do you mean that one would have many of them on the screen or something? If so, then can you have too many or not enough charts? It is a personal preference thing.
  3. cwb1014



    Thanks for your reply--I'm thinking I probably should have been more clear with my question when I began this thread. From what I can tell, DOM products offer very advanced order entry tools relative to what are available in most trading platforms. What I'm wondering is a what point--measured principally by the time frame one generally trades--these tools become overkill, by which I mean more than is necessary to trade effectively in the chosen time frame. It also occurs to me, and please correct me if I'm wrong, that if one's stops and targets are well out of the range of the displayed depth of market, then the DOM products may actually be counterproductive relative to the more standard order entry tools built into most trading platforms.

    I hope this is a little clearer to all, but, if not, don't hesitate to let me know and I'll try to clarify further.

    Thanks again.

  4. Chriz


    If i understand you correct you are talking about DOM based order entry. Well some of them have very sophisticated features like buttontrader or ninjatrader. I myself dont need all the features offered by BT or NT and many of the stuff they offer is a overkill for my needs.
  5. cwb1014



    Thanks for your reply. What time frames do you generally trade?


  6. It's overkill when you look at it at the wrong time.

    Rather than leave it at that, let me explain what I mean since I am convinced that 99% of the posters on these forums could not explain what that means had they said it. So presumably you have your "setup" as most people do. If your senses are based on several things, chances are that one of them has a preference. Some traders are simply just oversensitized and come up with long lists of exceptions rather than following along some particular order that is likely pervade their "setups".

    The first thing you may need to figure out is the type of information that can be pulled from the DOM. Depending on who you ask, the spectrum will be broad. Depending on what your answer to that question is will allow you to assess whether or not that information fits in to your setup.

    FOR ME, the DOM more or less gives me the market bias, long/neutral/short. Because I simultaneous trade on multiple time frames, this type of information fits in quite nicely with one caveat, the point at which the timeframe requires an action. Actions are based on decisions and decisions are based on information and information is the result of what you choose to put on your monitor (ie. where you gather your information from). So there is many parts to fill in to develop one's own trading construct.

    For instance, if on a 30M chart, I'm recieving indications that the scene is changing against my positions, I shift my focus to volume indications and if indications there confirm, I move over to the DOM to commit to the new bias. Once the flip on the DOM happens, I watch for sufficient VOLUME to establish the flip and then PRICE begins is translation into the DOM's bias. Given this construct, I'm only gathering information from the DOM when it is required which is very different from being on the DOM all the time. Even when I shift to trading just the daily bar, the above sequence is the same. However, this will all depend on what you believe which for most traders is the difficult part. It is hard to act on something for which you have not established a belief about. But the results are worth the effort.

    Kind Regards,
  7. Chriz



    i use a volume candle chart for my short term trading. eg when trading ES one candle is 5000 traded contracts. For other contracts i use diffrent sizes. See picture below. But i also watch other timeframes like 30mins.