What causes the price to jump +/- >1 point on the DOM when there are offers in btwn?

Discussion in 'Trading' started by IronFist, Oct 14, 2008.

  1. Say you're looking at the NQ and it looks like this:

               1376.25       20
               1376.00       20
               1375.75       15
               1375.50       35
               1375.25       20
           (2) [b]1375.00[/b]
     15        1374.75
     12        1374.50
     20        1374.25
     30        1374.00
     20        1373.75
    Pretty normal situation. People are trying to sell at 1375.25 through 1376.25.

    But then the next split second update to the DOM shows the trade at 1376.50.


    What happened to all those offers in between?????? Did they all get skipped? Did someone just get exploited with a market order?

    I can see gaps in price if orders are sparse like penny stocks or whatever, but not when there are no holes in the orders in something with high volume like NQ Or ES

    What is going on? What causes price to jump by more than the minimum tick amount when there are offers through the gap?

  2. All it takes in your example is a market order of 100 NQ to clean out the 5 levels of offers.
  3. But wouldn't that have traded through those offers rather than skipping them altogether?
  4. Ya know those market makers...
  5. Yah, the offers should print and then the next offer gets displayed.
  6. I'm seriously trying to learn how to utilize the DOM to my advantage but I feel like I'm wasting my time. I've found a couple articles on line but the things they say happen way too quickly for a human like me to capitalize on them.

    At first I thought it would be possible to just look at the DOM and maybe TaS and scalp for ticks hundreds of times throughout the day. Nope. The example in the first post of this thread suggests that's not possible. Then I read about how some guy was using teh DOM to pinpoint good entries when he got a good setup on his chart (to avoid seeing the setup, entering, getting stopped out, and THEN having price go a billion points in your favor). I dunno tho. Seems like the tide changes too quickly to even do that. But I'm not giving up yet. Just getting more and more annoyed :D :cool: :p
  7. I'm OCD about pattern recognition.

    And I also have no problem being wrong if it's supported by empirical evidence. For example if I read somewhere that "price goes where volume is," that would suggest that if the offer outweighed the bid by like 3 or 4x, that price should go UP. That makes logical sense.

    But if I continuously see that that situation is NOT the case, I won't be so stubborn as to not believe it. I will then change my belief to "price goes away from volume" as that would have been supported by empirical evidence.

    But I'm getting pissed cuz I'm seeing nothing useful at all other than random jumps and quickly changing balances of power. Predictability = zero
  8. bbqbbq


    dont look at the bid and ask, they can be removed, look at the last trade look for a large lot in a direction.
    that said, I dont use the dom at all, i'm not a program trader and it moves to fast for me to take advantage of it, so i just trade of a chart
  9. Which leads me to one of the following conclusions:

    1. There is no edge to be gained through using DOM

    2. There is an edge to be gained but my software is hindering me (ie. I am unable to utilize it)

    3. People who claim to use DOM as their edge are lying

    4. I lack the intellectual capabilities to use DOM as an edge.

    My responses:

    1. Likely the case. Hopefully if this is true I won't waste too much time.

    2. Quite possible.

    3. Quite possible.

    4. Doubtful, especially since I've heard a lot of floor traders are average IQ at best. They probably just have better resources (ie. give a genius a stick and a moron a machine gun and who is likely to win?).
  10. What do you mean "a large lot in a direction"? Like a huge order somewhere on the bid or ask side? If this is what you meant, then how does "don't look at the bid and ask" apply?

    Or do you mean look at time and sales?

    A related DOM question: How come some futures show 5 levels, but some show more (6-10)?
    #10     Oct 14, 2008