Hey Grantx, some things are meant to be shared in public and some things in private/semi private. That's all I was saying.
I’m assuming futures. Trading on the DOM successfully includes all your other skills. The key is knowing when to look at it, what to look for on it and the other displays that make the information more relevant. It is the place to carve turns. In addition to the annotation’s on your other charts, going to the DOM at appropriate S/R levels/channels/etc. gives insight into who is in control and the shifting of sentiment. Having 2 separate T&S streams, one filtered to show large transactions and two OTR charts - one for ES the other for YM support the effort to see the relationships. Even though limit orders are being opened and pulled on either side of the BBid/BBask, which is both captivating and distracting to watch, the things to notice are the things that aren’t explicitly seen right away. What makes music, is not only the notes played but also the pauses in between. The prerequisite to understand the above is bar-by-bar analysis. To start create a 5x5 grid on all the possible permutations that a 4-Tick single bar can go through. Organize it in some manner. It is a finite set. Within this set are three types of bars that can be seen. The drill helps to understand the path of least resistance and the path of greater volatility. Both of which have different observable characteristics on the DOM. More importantly the drill creates a place of inference to build LTM.
Sprout - this is the depth I have been looking for on this topic. Thanks. My ladder skills have improved 100% and I am slowly improving my ability to trade turns on the ladder but Im only about 50% successful of been able to flip with momentum flips at this point. ie. if Im scalping with volume to the upside- taking longs, then it turns and makes a top and starts selling, Im usually getting caught at the tops and only been able to flip to selling it on the turn. Does that make sense???? So about 80-90% of the time, I'm able to go with the direction and volume. But say Im long- about 10% or 20% of the time I can get caught in a small or big retracement. Out of these times - 50% of the time am I able to immediately flip and start selling. The advertising orders and market maker orders are fascinating to see. There are plenty of small flippers in the market driving or pulling price. I like what you say about the notes and pauses in between. What can I read from these pauses and the cycles? I think there is a lit to be taken away from a deep understanding of the small cycle ranges - 5 up, 8 down, 3 up, 5 up, 2 down....pause....3 down, 5 up....pause...etc. im happy though that Ive spotted it and am concentrated on improving on it. Im not fully clear on the above 4tick grid.
What do you have up on your display? What you describe sounds like reacting to a turn vs anticipating one. You’re on track with cycle ranges and pauses. It’s more revealing as one adds visual geometry with charts. Consider them moments of trader uncertainty (or certainty depending whether one is on the right side of the market or not. Price either continues or changes. Posting a chart with your annotations would help. The 5x5 is a drill down exercise is to create a differentiated awareness of market operation. It requires the work of memorization. By combining it with other drills, it starts to build sports memory. Sports memory gets served up by the unconscious in a state of Flow. Calibrating your display with your perception (observation filtered through bias) will make states of knowing via ‘Seeing’ What Must Come Next occur with greater frequency. The result will be a more relaxed, confident, clear & supportive relationship with the market. Contrary to popular belief, our emotions are our guide in life. Whatever we desire it is for the sole purpose of making ourselves feel better in the having of it. However there’s a lot of confusion in regards to how emotions can serve one in the trading world. Emotions are something to ‘control’ or ‘suppress’. Rationality and logic dominates this world as the key to success. Truly they are keys and yet there are locks which those keys do not open. Trading the DOM will have ebbs and flow like tides. The T&S screens will filter for larger lots that tip the scale toward the new dominant direction via 1)‘submerged’ market orders triggered by price discovery 2) The entry of new participants with a contra-view or 3) The exit of supporting participants in the dominant direction. Note areas of price pairs where the market orders are oscillating rapidly long and short distinct from areas of price levels that price scrolls right past. Expanding to larger and smaller timeframes helps clarify when larger players enter, exit & reverse. Some moves require what would be akin to drawing back an arrow on a bow or the compression of a spring. These are perceived on all timeframes if one understands trends are composed of trend segments. Like a fractal, as above, so below. The tick charts will show the shift in translation of the dominant BBid/BAsk two-pair. It’s easier to explore the different function of trader states (enter, exit, hold, reverse, etc.) at low volume pace periods. In other words during the middle of the trading day when volume is at it’s lowest and price movement is within a range - one can explore bracketing price via the DOM. Paradoxically, this area is also highest risk. This exists in a positive/negative spatial relationship. Price is in range until it’s not. Price is in translation until it’s not. Insights come when playing with positive and negative space existing simultaneously yet reveal a different picture depending on where you focus. For example working with the above; not in-range then is translating, not translating then is in-range. To understand the above, it’s necessary to suspend the judgements of current beliefs and have a direct experience. Take a blank sheet of paper. 1) Make a grid of 5 rows of 5 columns of a single bar. On all these bars make a small horizontal line to cross the vertical bar. Divide the bar into 4 equal portions. There will be a ‘tick’ at the ends of the bar and three between. This is your blank master. 2) On a copy, work through the possibilities of the open and close which is represented by the ticks. Look to form first before adding color. Ie. Price opens and closes on the bottom tick. Next, price opens on bottom, closes on one tick above. Etc. 3) Organize is such a way to make logical sense to you. 4)Post your result.
This is interesting. I am a bit lost when it comes to the grid as described? Can you share with me a sketch up you might have done before? I currently look at areas of gravitation on charts with my technical analysis, then use fundamentals and volume and price action on ladder to decide where price is looking to gravitate to. I think what you are describing is like a micro version of the ACD Fischer method. This
How does this help determine direction...or anything for that matter? If you see a large sell order it means somone has just bought that large order and vice versa. Not arguing with you because you are clearly more knowledgeable than I am on this subject. I just dont understand the importance.
It’s a necessary component to observe when in relation to other tools. Large orders come through at different times of day and at various price levels. When one separates the T&S stream, different price turns come into view. A large market order creates a different type of turn than a filled limit. It also sets up which type of turn to anticipate coming after. On a T&S stream filtered in single lots, it scrolls so fast, one misses this detail. The T&S streams are complimented by a DOM ladder which has volume profile, two OTR screens and 3 annotated charts of different timeframes - all being in relationship with each other. The function is to serve up the right info at the right time to make timely decisions. There is a calibration that is required. The T&S screens behave differently depending on how price is translating as it comes up to a ‘wall’ on the DOM. The wall holds or falls. Each of the of the T&S streams in their own way will give an indication which it shall most likely be. Even though the large orders can be considered gas for the move, it’s not the trigger. The trigger for the move is minority market orders originating from the opposite direction at annotated operating events that signal change. A OTR overlaid with a linechart can illustrate the concept of ‘dwell’ or ‘stickiness’ of a dominant BBid/BAsk pair.
From an interview with Paul Rotter: 'Sometimes I would sell at the low and someone would laugh at me for doing that, but I actually gained information, maybe by seeing there was big demand at that level. If they lifted a big offer of mine then I knew someone wants to buy and then I would try to go long. So it was very different thinking to what these guys thought I was doing.'