What about false bids(lots, limit orders) on the bid and ask? Market makers have been known to post phony large lots of bid and asks and then pull them at the last minute so people like you will see the large lot of contracts and think it is going up and then they profit from you after you buy in. They sell to you. And you are stuck in the market while it goes down. Relying on debth of market isn't a good idea.
1 Minute Timeframe Now 20, 50, and 200 MA's: 20 determines extremly strong trends, usually in the morning or during big breakouts, 50 determines medium trends, intraday trends usefull around lunch to determine possible reversals and such, and the 200, well that's just my speciality because price always reacts at the 200 MA and I capitalize on it. Support & Resistance lines Usually open a trade on the start of a new bar, and close before the start of the next bar. Trades rarely last more than a minute, and if they do, it's a rare, very rare. I trade fast moving stocks, the faster, the tighter the spread, the more it moves on a one minute timeframe to give me profit opprotunity while still removing liquidity, the better That's how I work.
I'm continuing to learn how to read the tape but I believe what you said correlates to how well one can read the tape. If theres size in the open book at price abc, but more size on level 2 at price abc than what is shown in the openbook, it's the specialist trying to make the stock stronger/weaker in order to shake out, or absorb inventory for himself or to work a large sti. order. In terms of phony lots, that's where I believe you really have to watch the tape. For example, if there's size in the openbook, and you saw it earlier that it's stepping up/down (being aggressive), it's probably real, but on the other hand, if all of a sudden there's size lined up after the first one, it's probably fake as if it's real and wants to get filled, it'd be ahead of the first size, and in that case, if it's just there and not stepping up/down, it isn't aggressive and should be careful. just what I noticed. some stocks, there's a good size on the offer, then all of a sudden 3 more big sizes goes below the first size, and when the first size is up at the top of the book, the rest of the size below it will just walk...
I used to trade using CCI. Now I added Market Profiling plus a market signal provided by www.tradingpro.com.
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What is Market Profile Market Profile is a graphical organization of price and time information. Market Profile displays price on the vertical axis and time on the horizontal axis. Letters are used to symbolize time brackets. marketprofile is an analytical decision support tool for tradersânot a trading system. Market Profile reveals pricing patterns from any market as they develop. By effectively organizing price and time information, it is possible for traders to see which price areas the market is accepting or which ones it is rejectingâ¦and adjust their trading styles accordingly. http://www.cbot.com/cbot/pub/page/0,3181,1168,00.html