Market Depth

[NickW]

I have a new tool to use in the IB TWS Market Depth screen, could someone pass on a few tips on how I should use it to influence my trading decisions.

And how different is Market Depth, Time & Sales, and Level 2, all three information sources seem to share characteristics?

I have a small brain so nothing to complicated!

Cheers, Nick

 

[options]

Market Depth.

It should be that you see trades going through and be looking for a weighted number of trades either long or short. You then go in the biggest direction.

If only it was that simple!

What you are looking at is an iceberg. You only see the tip of it.
Big trades get pulled before being executed and flipped or just cancelled. There are automatic trades in the system just sitting there and get triggered when price hits. Not to mention the trades that have been placed by the big boys hours, days or even weeks ago.

I have never known anyone to make good use of the market depth screen on a consistant basis. If anyone has, do please pass on the trick.

What is really wanted is a screen that shows the accumulated trades from all the big players that have been in the system for x amount of days, plus trades being fed in on a live basis. (Don't think the likes of us are ever going to get that though.)
Unless anyone knows different.

And yes Naz, I know the nasL2 screen is 100 times better. I have promised myself to give it a go this year. (Mind you I said that last year. (hmmm.))


ATB

Options.

 

[AC1]

I use US level 2 for occasional scalps.
Can anyone explain to me what the difference is between a US Level 2 screen and a UK one.

 

[Naz]

AC1

First of all UK level 2 is light years behind Nazdaq level 2.The way you play NL2 is completely different.

Everyone plays depth of market differently depending on their skill levels,reading of the screen, order execution skills,tactics,etc,etc.

To me there is no right or wrong way,but look at this if i was a scalper and wanted to get in i would want some support behind me,so i'm not interested in in that it looks like support,i don't care that there are fake orders that might get pulled.All i want is this,support.I dont want fresh air there because if we falter who am i going to transact against and get out.At this point looking at a one minute chart means nothing because all the action is there on your NL2 screen.After the players have made their moves then you'll see that move translated as a move on the chart.

I want some idiot faking because i'm watching the main players,when they move and were going down i'm going to hit that fake order before he pulls it.I've also got plan b and plan c.So i need depth of market as my stop and i read the play faster than they pull their orders so that i can hit them.They are my life line.

To me there are two profit factors.The first is how you are going to play the next market move.The second is how are you going to play your level 2 direct access screen.To many new traders think about the market move and not how to play the screen.So they view the screen as any ordinary person would thinking it makes sense then they find they get fooled.What they are lacking is how the screen is being played and how to take advantage of the underlying situation.

Of course another thing to think of is how is the ax playing depth of market?

So there you have it,i hope it makes sense,if not you'd better come on a t2w 1-2-1 NL2 training day. 🙂

 

[Skimbleshanks]

I use market depth for one thing only - to make sure that my data connection is still live. There are occasional times during the day on ES when the price just sits there without moving, and it's reassuring to know that your data is still working by looking at market depth. Sad, but true ...

 

[zader]

Naz
What is the AX you mention?

 

[Naz]

The ax is the controlling market maker.

 

[zader]

Many thanks

 

[Naz]

You're welcome.

Much of the time the real clue is how the primary and secondary ax are playing the depth of market.Colour them in and follow them around.When others are showing size what are they doing and where are they operating?

Remember many people talk about depth of market as only something that exists on the instrument they are trading.Many have not seen depth of market live on a NL2 screen and understand what is going on and how to take advantage of it.As i said NL2 is light years ahead in direct access trading.

In the east you thought you had a decent car if you had a trabant, because you knew no better.Come to the west and you are in wonderland.The same can be said about direct access trading screens. Of course this is only a personal opinion.