Would I be able to see this on the DOM? Lots of market orders going through, but price remains steady? Just curious what is the best way to identify this phenomena... any ideas?
1) Limit orders "collect" the bid-ask spread. Market orders "pay" the bid-ask spread. 2) Limit orders "stabilize" the market. Excessive market orders "extend" the market's price range within the time frame you're looking at. 3) Limit orders are "better" in slower-moving markets. Market orders are "better" with faster-moving markets......confirmation of the obvious mostly.
You watch the DOM and the time and sales. If you see prints going off for volume, but the bids keep coming back/refresh, you know that limit orders are "soaking up" the market orders (or marketable limit orders, same thing for what you're talking about).
So in an area where you see many market sells hitting the bid yet price remains steady, or even upticks slightly, it's safe to say that demand (in the form of limit orders) outweighs the supply (market sell orders in this case). What happens when the supply dries up and nobody else is willing to sell the bid? I've got half the equation... just trying to figure out what happens next to cause price to go up. Sellers covering and new buy market orders seems to be the most logical repsonse.
The DOM sure moves fast on the ES. It's hard to keep up sometimes, but I see you're point exactly. I guess a good idea would be to record the DOM at an area where price has found support or resistence, and then slow it down to see what actually happened. What have you noticed at market turns? Does it begin with bids being refreshed, followed by new market orders starting to take out the ask... pushing price higher?
Great questions, It's very good that you are thinking in terms of market participants, what they are doing, when they are doing it ect. Wyckoff helped me understand "the tape" better so you might want to read some of his material. Personally I just use price and volume because dom and Time/sales gives me a headache . Sometimes I'll use it if the market is slower. Have to read everything in context too Best wishes!
1) By definition, trading volume at price extremes is supposed to be light/thin. 2) It can "feel" as though the market has lost momentum. The tape "slows down" from exhaustion of the trend. 3) New buying and short-cover buying can enter the market which can then "flip" the prevailing sentiment from bearish to bullish.....confirmation of the obvious mostly.
Another thing to watch for is for people pulling their orders. When you see resting orders, but large amounts of those resting orders evaporate as soon as that price starts actually trading, that can signal price will move through.
I trade CL and I often see unusually large size parked at key levels. I've noticed that the majority of the time price moves to, and through, the level whether the size evaporates at the last minute or whether the size actually gets "eaten", so to speak. When I see large size parked at a key level in CL, I will frequently put on a trade prior to that level in the direction of the level because of that "magnetism effect" of the large size. Not sure if this occurs often in other instruments, but I've found it to be a very high probability signal in CL, if I'm not already positioned.