Market depth on ES and charting it

peto

Established member
Hi

On IB (not the demo unfortunately) you can get a market depth table for the ES for 5 levels. A diminishing volume on the bid at the first level with an increasing volume on the ask is clearly a sign that the price is about to drop a tick, as I'd expect.

But down on the 5th level, reading the cumulative totals, the volumes seem to be the opposite, and while the price is generaly falling (over a time frame of a few minutes) I notice that the cumulative bid volume is often higher than the ask, sometimes double.

So two questions: 1: Why does this happen? It seems to me the opposite should apply.

2. If this is a tradeable signal, then is there a software package (eg Sierra) that is able to chart the 5th level?

Actualy a 3rd question occurs to me: Does anyone else use the market depth table for index futures? I'm well aware that Naz and others use level 2 for stocks but this is a lot different.

much obliged for any help,
Pete
 
I use it very occasionally, but only in slow moving markets (like the one on Friday afternoon US time), and as you say just for knowing when the price will move.

I find that in normal trading the market is moving far too quickly to be able to deduce anything much from market depth, even the 5th level, but perhaps I am missing a trick. :D
 

Trader333

Moderator
Peto,

Bear in mind that Market Depth does not show Stop orders or Market orders and as such does not show the whole picture.


Cheers


Paul
 

Mr. Charts

Legendary member
I do some coaching in futures trading as well as US stocks, and normally advise people not to place too much reliance on DOM.
It can be useful for reading where support and resistance keep returning to, but cannot be used in isolation as a trade trigger.
Limit orders can and are pulled instantly leaving you stranded if you trade merely on depth.
You need to see the fluid nature of depth to start getting a "feel" for it. The actual speed of trades also matters. If, for example, the number of trades going through is low, then depth of market is more significant. If it's very high and the market is moving quickly, DOM is useless unless you are scalping very small moves.
I feel that an awful lot of advice given on BBs is not from experienced full time traders, but more the blind helping the blind. Now that does have its uses and engenders some community spirit, but anyone thinking of risking real money of BB advice should first look at a lot of the particular poster's advice on other threads, (which is very easy to do on T2W), and assess the actual value of the advice before following it.
Having said that there are some really good people here, you just need to decide for yourself who they are.
I think you've already had some of them on this thread ;-))
 

peto

Established member
Many thanks to all who went to the trouble of replying to this thread. Mr Charts, I take your warning regarding certain posts; however I have respect for yourself , Trader333, Skimbleshanks and certain others that have given of their time to give the benefit of their experience to others

I think the study of market depth might warrant further time but I won't be risking hard cash on any half baked theories. If I come to any amazing insights I'll let you know!!
 

DionysusToast

Legendary member
Jeez - I hope it's not 7 years till we get the reply...
 

Shakone

Senior member
Going back through 7 years of threads to complain about it is a bit much though isn't it?

In any case, useful is a relative term. A sniper rifle is useful to a soldier, but not so useful to me in my day to day life.
 

DionysusToast

Legendary member
because it is misunderstood...

As shown by the statement:

"A diminishing volume on the bid at the first level with an increasing volume on the ask is clearly a sign that the price is about to drop a tick, as I'd expect"
 

aversano

Active member
I started looking into trading without charts and using market depth + T&S as a tool to determine market direction.

Any thoughts?
 

aversano

Active member
It is definitely useless when not used. I find that it displays valuable information on a tick by basis. Will know better in a month.
 

DionysusToast

Legendary member
market depth for ES is generally useless

Strange that I use this every day and get a lot of use from it.

Can you explain why market depth is useless ? Is it not perhaps because you don't know how to read it ?

Consider the following though....

Why does Xtrader platform support "EPIQ" - Estimated Place In Queue to allow people to see how close their spoof orders are to being filled so they can pull them in time ?

Why do people spoof the DOM ?

Why do people put out iceberg orders ?

Are they doing it for a laugh or are they doing it to make the market look weak/strong to sucker in people that don't know any better ?
 

aversano

Active member
Today I have spent all day staring at the Market Depth screen and using the chart as a price reminder. My entries were based on what I considered as "spoofing" or someone who is trying to accumulate at a few price points (3 ticks range)

Can this method be utilized by a human being. DionysusToast, you thoughts?

I am trading the ES
 

rainman2

Active member
Today I have spent all day staring at the Market Depth screen and using the chart as a price reminder. My entries were based on what I considered as "spoofing" or someone who is trying to accumulate at a few price points (3 ticks range)

Can this method be utilized by a human being. DionysusToast, you thoughts?

I am trading the ES

Is your charting software capable of charting market depth. It would certainly be easier on the eyes. :)

Try using depth with cumulative delta volume(yellow line)

1278593419_67_UploadImage.png


Also search dcraig1 posts on order book and market delta.

http://www.trade2win.com/boards/search.php?searchid=5979416
 

DionysusToast

Legendary member
Today I have spent all day staring at the Market Depth screen and using the chart as a price reminder. My entries were based on what I considered as "spoofing" or someone who is trying to accumulate at a few price points (3 ticks range)

Can this method be utilized by a human being. DionysusToast, you thoughts?

I am trading the ES

It certainly can. If you can spot the spoofing, then your next step is to learn how to spot the icebergs.

If you have spoofing on one side and icebergs on the other, it is very likely that someone is building a position and unless someone takes them on, they'll certainly get the 3 ticks you are looking for.
 

aversano

Active member
It's a tough game to play and sometimes I wonder if this is the right way to play it. My average winning trade was around 3 points per ES contract but the hard stop was something that I couldn't get used to mentally, especially when I felt that the market isn't in my favor. Started exploring other ways of exiting which lead me to the market depth. This also effected my style of trading. I became a scalper who is trying to read the market and exit as soon as things seem to go wrong.
 

DionysusToast

Legendary member
It is a hard game to play and I can't watch it all day - for one thing, the US markets open at 8:30pm Thailand time and my focus isn't 'prime time' then.

I think it can be used to refine an entry, which you then want to turn into a runner, so you can get points instead of ticks.
 
 
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