When considering the ES...here is why DOM "depth of Market" is deceiving...let's say that the "wall" if you will is +4,000 at the "ask" side or "buy orders"...well that can mean 2 things: #1-orders to buy believing that market will go higher #2-orders for shorts to cover/lock in profits and no real sentiment of where market will go ...so, really nothing can be gathered as far as future "price action" from the DOM...do you concur or am I not seeing something...this is a serious post and not joking...thanks!
Lots of games are played on the dom increase. I would not put much effort into it. As the other post said, if the dom was 100% accurate, we'd all own a private island by now.
Although I am new to Futs (ES in particular). it seems that the DOM is a lot like the Level II screen in that there are many "false" bids (or offers), and many times participants will try to front run the genuine bids (or offers) then pull them, because big players can manipulate things like that. I take it for what it's worth: There are only two real pieces of information that cannot be fooled with. Last price and lot size. It's only natural to feel decieved when price reacts differently to what "appeared" on the DOM only moments before.
Well, you never know if the orders are entry of a new position or closing (in your example covering a short) unless its your own or friends order. Not even the tape or anything else will tell you that. Is that the DOM's "fault"? I would say no. The spoof with large orders of course can pull someone a trick now and then. DOM is pretty honest, it tells you what is there. If one choose to believe that all orders are for real - then I would agree it could be confusing
Traders should be profitable. I do not give a shit how as long as it works. If ticks is important to their style - fine!
The DOM is a very rich source of trading information, especially for front running the market. Four games that overlap very little in strategy are played concurrently. These can be peeled back to see what remains. The DOM is rather unique in what it shows as compared to other displays used for trading. The independent variables of the market, in combination and at various degrees of fineness go far towards showing what is happening in the present (NOW). Whether a person runs manually or on ATS, the degrees of freedom of the market outputs coming to the trader as inputs, can be greatly enhanced mathematically and scientifically (about 70 degrees is sufficiently sophisticated). Then there are the other tools of the market aside from the independent variables. The DOM fits in here as well as the other "tick" oriented and other market indicators that are not P and/or V derivatives. Were one to consider shifting NOW in time as an offset from the present, the DOM becomes the tool of choice. To be able to look into the future by an offset in time stemming from the present into the future is an important and possible innovation. When you look at the traders "boxes" that traders fit into (about 30 or so) several of them are slaves to "knowing the future". This is not a statement about the artificial dependency of the conventional orthodoxy of predicting and consequent money management and protection obligations. this trading orientation of CO is not on the table. I clock the four games directly and indirectly. What this states is that I have displays that deal with times that occur in the near future. They state when a class of events will occur. I like to know in advance of happenings whyen they will be happening. The DOM, when the games are peeled back states such. You have a belief that the DOM is deceiving. That is your choice. how you reached that conclusion is yours to own. As you may see in several other threads, there are people who are not feeling deceived and, further, they are using the DOM as a component of their trading. So, if a person prefers, he can use the DOM as a way to shift into the future and monitor what is happening in this future offset. In effect, it makes the actual real present a time in the past relative to the offset. how a trader feels is this: I am doing all of my real trading in a place in time that is the past. This is a great personal orientation for making money since the concept of risk has been deleted from the picture and as a trader, you know that you know. An example is landing a plane. I follow stringent flight regulations; everyone does. after my last appraoch turns, etc, I am lined up and have proper airspeed and rate of decent. It is fairly certain where the touch down is going to occur and where the landing will end. Thinking really focuses on formulating the next stage of decision making. In trading, it is a good idea to know of your next action in advance interms of the variables: price, time and contract sizing and direction. some traders get to a stage where they are always in the market. You aren't one of them. Being in the market all the time is like driving from the open to the close in a car. Driving actions are simply a series of events. Reading the DOM is like reading the road so you can manage the car correctly in the very near future. Think of your trading log. You write in it in advance what you are going to do in terms of the time, the price, the number of contrcts and the direction of the trade (think of a reversal type trade). The information you are using comes from the DOM. I could write out a series of manual instructions for you do or I could have the computer simply print out a log for you in advance by using the DOM. The DOM is like every other tool in trading. There is a requirement that you understand the operator's manual. Teenager's get into this for drving cars and for flying planes. Actually tests are given for teenagers to have licenses to use these lethal weapons. Make a list of the trading tools. See if you are liscensed. You are not and you do not, as yet, have one operator's manual. The DOM is like a well tuned racing car for trading. The car can be very deceptive on the track for anyone who just stepped in it to take a spin. Stay out of the car and off the track until you get an operator's manual and learn it.