Level 2 DOM orderbook trading strategies...

Discussion in 'Order Execution' started by mizhael, May 1, 2009.

  1. any pointers about trading strategies based on level 2 market depth order book data?

    Thanks!
     
  2. bellman

    bellman

    I too am curious. I suspect it varies from equity to equity. For some stocks would most of the DOM more than a few cents away from the trading price be fakey? How does one harness the DOM?
     
  3. I hear that a lot.

    Nothing is fake, cept those that tell you it is.
     
  4. re depth of book being fake, there are certainly games played with very large size shown. You could hit it, but I almost never have seen this on what I watch.
     

  5. Lets say you are looking at the ESXX DOM. You can perceive its dynamic.

    1..What is the most common dynamic?

    ___________________________________________



    2. What is the connection to the T&S and the DOM?


    3. What is the connection of tick charts (OTR) to the DOM?



    4. Who controls a long trend? A short trend?

    _______________________, ___________________


    5. Place in order of frequency the other four most common dynamics:


    A. _____________________________


    B._______________________________


    C. _________________________________


    D.____________________________


    6. So what is the most common reason for a trend not continuing? It is none of the above mentioned items.


    ____________________________________

    7. How many points before the trends turn do you get to see it on the DOM?

    8. By how many seconds minimum does the DOM lead price?


    9. By how many minutes maximum does the DOM lead price?


    10. What is the best indication on the DOM of pending news?


    11. What is the best indicator of the strength of the news?

    12. How long does news last on the DOM?


    13. What happens after that ends?


    14. How do you know, from the DOM, which way the news is going to take the market?


    15. What is the most common fake out on the news before the news? How long does it last? who gets faked out? (contract sizes)


    16. Do you have snapshot powerpoints of how the four games that are played on the DOM are demonstrated? What year did you make them? Why doesn't ET handle power points?
     
  6. A DOM Strategy:

    Use DOM with seven other panels when the charts tell you to (S/S, T&S> 50, All T&S, YM (OTR) volume, price, ES (OTR) volume, price.).

    Watch for (1); means no action for the moment. See what is controlling (4).

    Watch (4) reach (2) by checking(5 A, B, C, and D).

    (6) appears (7) away from the BBid/BAsk. Then in (8) to (9) before (2) (See (6) appear).

    Start countdown in (7), 8), and (9) and put trade on execution platform if no ATS and operating manually. Also add the wash trade (or next reversal if high velocity trader).

    News is known ahead of time (See your Calendar of Events). Four consecutive trades are possible on news. See (10) to (15).

    (16) helps as a drill. Pick up Camtasias from someone who knows DOM and seven other panels.

    QED.