DOM / Orderflow Trading. Is it still viable?

[Big_P]

Hi All,

I know the topic of Depth of Market / Orderflow trading comes up from time to time. I did a search and it's been a while since it was last discussed.

I started my trading journey in 2007 when orderflow trading was all the rage. There were famous traders, Paul Rotter I think the most well known, who were making an absolute killing from Level II / DOM trading. I personally knew a trader from a prop firm called Futex (I don't the firm exists any more though) who made serious money from it. But then shortly after the 2008 financial meltdown, this trader told me that DOM trading was becoming increasingly more difficult due to "algos taking over". He quit trading soon after.

DOM trading gets discussed every so often on here but I did a quick search and it's been a while since there's been a thread.

My question to the T2W Community: Does Depth of Market / Level II Trading work any more?

And what I mean by "work" : is it still feasible to read the orderflow on any particular market and make money from doing so? Is there anyone on here that makes a positive return from Level II trading alone?

I am asking this because I started at a prop firm myself in 2007. I traded the Schatz, Bobl and Bund but never really got to grips with DOM trading. I went round the houses and ended up swing trading which I have been doing ever since. However, a lot of my time is sitting on my hands. I'd really love to revisit daytrading and have another go at Level II. But I don't want to go down this rabbit hole if it really is a dead art.

Any advice would be much appreciated!

Big P

 

[Big_P]

Quick bump - has anyone got any thoughts please?

 

[BigDeal]

My own opinion is that it is not useful enough for the individual (day) trader. I believe there is a lot of spoofing going on these days, making it impossible to use in a meaningful way.

 

[Big_P]

Thanks BigDeal

That's what I've heard too, the spoofing has made it very difficult. That said, there was a lot of spoofing going on when I tried it about 15 years ago. And I recall traders being able to navigate around the spoof orders and still make it work for them.

I'd be interested to hear from anyone on here who still trades Level II or has done in the past few years?

Many thanks,

BigP

 

[timsk]

Quick bump - has anyone got any thoughts please?

Hi Big_P,
If you can track him down, the person to ask is Peter Davis, aka DionysusToast here on T2W - but he's not been on the site for over a year now. He owns and runs (or used to anyway - no idea if he still does) Jigsaw Trading, a firm whose software specialised in helping traders track DoM order flow.
Tim.

 

[Big_P]

That's great, thanks Tim. I'll do that.

 

[Velarcus]

DOM trading and order flow trading are two different things. The DOM is mostly useless due to spoofing, iceberg orders, are dark pools. You just cannot see the flow. Order flow trading is about focusing on the orders that are likely to materialize IN THE FUTURE. So, don't even bother with the nonsense in the limit order book. Reverse engineer the complete order book from the chart. Orders cluster at support and resistance. Sentiment is the tool that pushes price from one zone to another. Focus on that.