Let's learn/discuss how to read the DOM and Time and Sales

Discussion in 'Trading Software' started by 1a2b3cppp, Apr 8, 2013.

  1. Many "gurus" will say "watch the DOM for hours and suddenly you will learn, young grasshopper," implying that they have some secret knowledge and you don't. They may even PM you and offer you a "special rate" on their stupid training programs that have never produced a profitable trader.

    This thread is the opposite of that.

    We are going to discuss:

    1) the information provided by the DOM and Time and Sales

    2) specific ways this information can help you

    There will be no vagueness, you know, like a picture with the caption "it's so clear!"

    I have been watching the DOM and TaS recently and I'm trying to quantify the information it can give you.

    For the most part, it just seems like a bunch of randomness.

    I have modified the default DOM to also show total volume at each level and volume bars at the level of the each bid/ask.

    [​IMG]

    The dashed red line is the high of the day (which was actually this morning before regular trading hours).

    Like I said, randomness. Sometimes price goes up. Sometimes price goes down. I have noticed no correlation between whether price going up or down has to do with more or less orders above/below the current price.

    I've heard that price goes to where the open orders are. If this were true I would expect price to always go up if there were more ask offers immediately above the last price, or always go down if there were more bid offers immediately below the last price. This is not the case.

    I have also noticed that sometimes there are still bid/ask orders remaining at the current price, yet price will trade away from it. Why does this happen? For example right now the last price was 1552.00 with 1533 ask orders remaining and 1340 bid orders right below it at 1551.75, yet price just traded down to 1551.75. Why? There were still ask offers where it was at 1552.00. What would cause price to move away from that level when there were still orders at that level?
     
  2. Time and Sales:

    I have set a filter to only show trades on the ES of 10 contracts or larger. I chose this size because there were tons of 1-5 contract trades and I figure those were just the small traders. I would occasionally see ones between 10-50 and very rarely 50-100+, so I figured 10 and larger was a good value.

    I am watching price on a 1 second chart, a 500 tick chart, and a 10,000 volume chart while watching the DOM and TaS to try and see what happens if anything at specific points or levels.

    A thought I had is that at S&R levels there might be more volume that usual which would appear as big (or rapid) orders on the TaS.

    I know some big traders break their big orders into many smaller orders, so sometimes when I see a bunch of 10-50 contract orders all appearing at the same moment, I figure it might be a big trader that just broke their order in to pieces so it didn't appear as like a 500 contract order. Like this:

    [​IMG]

    Look at all those orders that came in at 1:16:49 for 10+ contracts each.
     
  3. The first time I saw a ton of orders all at once, price had been going up for a little bit and I thought "it'd be nice if this were a top" (resistance). Cuz supposedly all the big guys put all their orders at S and R places.

    So I watched as the orders poured in and the TaS scrolled down pages at a time.

    And price kept going up.

    And up.

    A bunch of orders filled at the bid. Price went up.

    A bunch of orders filled at the ask. Price went up.

    For example, at 12:33pm (CST) on the ES, a ton of orders came in. Here is a chart and some of the Time and Sales orders:

    [​IMG]
     
  4. All those orders were filled at the bid. There were a bunch more orders a few seconds later that were filled at the ask:

    [​IMG]
     
  5. After that there was another huge blast of orders filled at the bid at 12:33:45 but I'm not attaching an image for that one because you get the idea.
     
  6. Does anyone know what it means when some of the rows are highlighted in the TaS? You can see examples in some of the TaS images I attached.
     
  7. Question: what is the number highlighted in the yellow row which is a 10 in this chart? Is that the number of contracts filled in the last trade?

    [​IMG]
     
  8. simple, someone sold into the bid... in order for 52 to go bid, 1533+ contracts have to be bought (assuming no icebergs selling at that level)...
     
  9. yes, and I think you should learn your platform at this point in time... the questions you are asking as basic things IMO...
     
  10. Well this is a basic thread for beginners to DOM and TaS like me so I think it was an appropriate question.

    How come when the big 100+ orders come in that yellow section never says 100? I've never really seen it get over 10, and usually it's below 5. The fact that it happened to say 10 in my screenshot was because it randomly changed to 10 for an instant right as I grabbed the screenshot.
     
    #10     Apr 8, 2013