Wall at the DOM

Discussion in 'Risk Management' started by moonmist, Jan 14, 2013.

  1. moonmist



    I have a question about trade management:

    A SELL LIMIT order for CLG3 was filled at 93.89 before the pit session. Few seconds later, a large bid size ( over 120 ) appeared at 93.87, Would you

    a) pretend that nothing has happened, and act according to your trading plan.
    b) move the target to 93.87
    c) get out immediately


    Any comments or suggestions would be appreciated.
  2. mm19


    you ask for any feedback, so I will add mine :)

    Question is incorrect.

    Question should be which option you list, retail will think is correct.

    Action should be - go against them.

    As there is little retail in this space, no high probability setup will present.
  3. moonmist


    Any DOM traders who woild like to share their experience ?

    Two days ago, I chose option b), and ended up with a small profit.:)
  4. bone

    bone ET Sponsor

    In today's traded volume thus far the Feb contract is still greater than Mar. But if you look at standing open interest, however, Mar has twice that of Feb.

    Interpretation: you are in the midst of the Feb roll and you will see that more frequently, especially as the exchange is matching synthetic spread orders.

    And fading those moves is very hazardous, because that saw definitely cuts both ways. Scalpers can really get burned during the spread rollovers. Do not assume mean reversion back to a previous price print.
  5. NoDoji


    I believe in following one's plan (assuming it's a well-defined plan with a proven edge, that is). If reacting to what shows on the DOM isn't part of your plan, then it shouldn't be part of the decision-making process.

    FWIW, selling CLG3 at .89 prior to the pit session a couple days ago was a low odds entry price. Price had broken the down trend line and was pulling back. You'd expect it to pull back to the 93.85 - 93.86 level and find buyers anxious to have a second opportunity to get long. That's probably why you saw size at .87. When the test of the TL breakout high resulted in a failure, the .89 short was then a "second mouse" slam dunk.
  6. If a penny or two makes a difference, you're "fishin' in a dry hole"... play for bigger and be more tolerant of "noise"... mostly because you can't do anything about it.

    If you're a "small, retail" trader... your trades will be on the wrong side of noise and slippage most of the time. If your strategy doesn't allow for that, you've got little chance of success.
  7. bone

    bone ET Sponsor

    Very good point. In 2011 and 2012, the CL contract had 20 day historical volatility ranges from 16 - 50 %, and 20 day average daily trading ranges of 150 - 400 tics ( the summer season having the larger trading ranges ).

    Flipping CL for 2 tics is a great way to get smoked.
  8. moonmist


    The original target was much bigger than two ticks.

    When I saw a bid size of 126 at 93.87, I knew that CLG3 would likely reach this price. However, I could not tell whether it would dive or surge after hitting the wall. When in doubt, get out. Hence, I scratched the trade by moving the target to 93.87.