Market Depth patterns

Discussion in 'Strategy Development' started by rhay, Dec 23, 2004.

  1. rhay


    I scalp the Dax mainly and try to use market depth to position my entries and exits. If possible, I position stops behind/within large volume and sometimes position limit entries in front of large volume.

    I realise that this is an inexact and sometimes unreliable science because of the limit display only, pulling and spoofing etc.. However, I do feel that it has something to offer and think I profit from it in quite a lot of my trades.

    I have also noticed some patterns in market depth that tend to prodvide support/resistance and to some degree direction.

    Has anyone else noticed patterns that they use?
  2. I scalp the dax quite heavily. Generally, I believe that putting stops behind size or getting in behind size will yield poor results in the long run.

    Obviously, this is not necessarily true if the size is there because of S/R or something else. The market will very often trade to size, so you might be catching a falling sword on frequent occasions.

    Just so you know what my angle is, I trade around 700 to 1500 contracts a day and more on active days. I trade but I also bring on guys and train them to trade my money. I thought you should know that my comments are based on experience.

    Best wishes.
  3. scouse


    Hi Rhay

    It is interesting that you bring up the subject of market depth. I to scalp the dax but not to the same extent as FutureTrader71, I trade between about 15-20 round turns aday. I have spent a considerable amount of time studying market depth and I do feel as though there is an edge to be had in there. When I studied MD I was looking at the ratios between the bid and ask sizes at different levels and came up with some very interesting results.


    I take it you have a direct connection to the exchange and only look for about 1-2 ticks at a time? Have you ever looked at bid ask ratios using the DAX market depth, as my long term aim is to automate my analysis of different ratios at different level of market depth?

  4. Actually, I go for whatever the market will dish out. I scale in and out all day long and will add and hold and reduce depending on the depth, tape and approaching support/resistance.

    Yes, I do have a direct connection through my clearing firm to the exchange. I trade in the room next to where the line comes in from the exchanges. It is as direct as it gets.

    I don't believe in bid/ask analysis. I haven't gone too much into it but there is way too much fake stuff in there. There are good reason why the market will trade towards size, so bid/ask is not much more than an illusion, in my opinion. Like I said, my skill is based mainly from trading the product for some time and from watching the market from the time I come in until the exchange is closed. It is all discretionary and, therefore, my risk plan is key for the group and myself. I use CQG for charting and rely on that when the market is range bound or quiet. Other than that, I will watch the book and know what is probably real or not in there.

    Please feel free to share your thoughts.
  5. virgin



    How many trades you do on average per day ?
  6. You should...

    But let me tell you that only a computer would be able to do that for you. Just forget finding something interesting with your eyes only.
  7. qtip


  8. qtip


    From a technology standpoint, can you give us to some insight on how the bid/ask ratio can help with trades.
  9. I complete about 300 to 500 trades a day. Those trades are scaling trades so many of those will have multiple entries and exits within on breakouts and trends. It may seem a little crazy, but I'm a pure scalper with the lowest possible commission and fee structure. Hence, I don't have to worry too much about the number of contracts traded. I hope that makes sense.
  10. Can you give me an example of what data I should be looking for? I have all the bid/ask info I could ever needed, but have found that there is so much cancelling, etc that it doesn't really mean anything except at certain zones or levels.

    Please share any thoughts on this. I am very receptive to new ideas.
    #10     Dec 23, 2004