Order Book help

[Balthazar]

HI fellows,

Asking for help or explanation of a situation I can't understand in the order flow reading.

Very often the Bid or Ask quantity doesn't match the execution, but there is two situation:

- Bid or Ask become suddenly very thin but the traded quantity increases. Say 10 goes Bid and it was about 1500 (Bids) and traded about 300 (contracts). Then Bid nearly disappears (57) and Ask becomes huge (2398) and the traded volume say almost 12 times (3894).

-------9---2398
57---10----------3894

I understand someone is hiding Bids but still buying at 10. And may be chows a huge Ask in order to make the market look weak at 9. (If I'm wrong, please, correct me). This is a situation I understand. But I don't understand the second one.

- Bid (3894) or Ask (2389) become incredible huge but the amount of traded contracts become very thin (57), almost inexistent. Sometimes the Bid/Ask still as before but the amount traded dry out.

---------9---2389
3894---10----------57

And trades so for few moments, goes Bid or Offer but the tape shows only a few dozens of contracts traded.

My question is: how this is technically possible and how do you read this? There are thousands of Bids (or Asks) but the execution shows only few real trades. Does it means those guys are pulling they Bids/Asks just few contracts before the last execution? I mean pull the orders just before being filled? Or it means there are really few contract for sale at the moment? But how can Bid show 3894?!

If someone can explain this, it will be really helpful

Thanks

 

[tommog]

What you see in the order book is rarely what is there, just for starters you have "iceberg" orders, so you could theoretically see a 1 lot trade 5000 times, it just keeps refreshing and coming back.

Likewise you might see a 5000 lot that is programmed to be pulled if a 1 lot trades in to it.

You are not obliged to trade the volume that you show

All part of the fun im afraid

 

[CityTrader]

Hidden orders, tranched orders, all or none orders, flash trading orders.. and then of course different markets have different systems. which market are you trying to follow?

 

[takeum]

I think what you are describing is algo trading that joins an offer when the bid is trading or just ****ty thin markets where traders bid for more size than they actually want ,so when it trades a 300 lot they all pull their bids and join the offer ,again in more size than they need.

 

[Balthazar]

No, mate, I'm describing any ticket (X_Trader). You can allways see moslty exchanged contract shown in the DOM but when you follow the tape in the same time, you see the exchanged number was bigger than shown. I think it's probably because the X-Trader "smooth" the datas.