Stock ribbon (Times & Sales) and effective trade exchange

Stock ribbon (Times & Sales) and effective trade exchange

The stock ribbon is a great help to the traders in trading, although many think that it is almost impossible to read the stock ribbon and the DOM (Depth Market Market) after a wide arrangement of the HFT algorithms on the market. But the fact is that most of the successful traders have the art of reading the stock tape.

According to some traders, the graphs are a history because they are created in the stock line and the flow of incoming traffic in the DOM. The graphs cannot exist without the stock ribbon, but the stock tape will always exist without graphs.

It should be noted that the information received from the stock tape and the DOM fills each other, although the two modules come in very different information.

Fig. 1 - Limit orders layout DOM module

In the DOM we have information about the possible intent of the traders. Bid and Ask, which are located on either the side of the columns with 10 rows, indicate the limit of both buyers and sellers. As for the Stock market tape, here we are provided with market-based marketing orders, according to specific levels, time and volume, both from the buyers and the sellers.

Why should we pay attention to trading with a ribbon?

Fig. 2 - Market orders are executed at the market

First of all, we should say that the stock ribbon, as well as the DOM, should be used only with the buyer or seller's strong accumulation zones. At the moment when the price is closer to that area, the stock ribbon and the DOM will provide you with the first information about whether or not a large player of this accumulation zone.

Therefore, when applying these instruments, we should ask ourselves the following questions:

1) Where is the present price?

2) How do I see the activity of buyers and sellers at the moment of my interest?

3) What kind of volumes do you get at this level? Volumes are made by Bid or Ask?

4) Volumes increase at the given level or decrease?

As we already know, the logic of the action of a large player is as follows: Reduction of liquidity from small traders with a limited range of buyers (buyer or seller) from the market and then taking the price of market orders in the desired direction.  All the big player operates with this scheme, no matter whether it is currency, commodity or stock market.

There are special programs that report information on the implementation of large limit warrants at a certain level. Additionally, a large player in the commodity markets will have a certain resource. In order to ensure that its large warrants do not see a wide range of traders, it uses some methodology to dispose of its large warfare as a fine order and a large order will appear in the stock line as many small orders are executed at one price. With the help of specialized software, it is possible to reconstruct the mentioned large warranty and transfer it to the stock tape. This module is called a reconditioned stock tape.

In addition to a certain amount of fittings on the stock tape, it is possible to identify large and small orders executed on the market helping traders to make the right decision in time.

Sculpture 3 - DOM - Buying an asset at a higher price by a large player

In addition, we should remember one moment when a large player starts to buy the price of liquidity from the market in the direction of its destination, its goal will be to absorb the full range of limitations at the lower levels to make the price as fast as possible. For this purpose, he will try to buy/sell the asset market price at the above price (above ask price, below bid price). As soon as we notice this, our action should be appropriate to get into the position of a large player and get a bigger profit.

Fig. 4 - Stock ribbon - Buying an asset above the price of a large player by a large player

If you are a newcomer and now you start using the trading ribbon and DOM module in trading, we recommend that you focus on not all components of these tools but one of the following. With time, you will be able to simultaneously perceive a larger component that will help you find the trading process.

1) Buyer's and seller activity - When you start to study the stock ribbon, focus only on the actions of the sellers or buyers. If you're waiting for a trend change in direction of the upward trend, focus your attention on the buyers. It's so easy to perceive events. Over time, you will be able to monitor the activity of both parties.

2) Lens rhythm and acceleration - When a large player begins to enter positions at a certain price level or in a certain range, through a special algorithm, it attempts to break down a large order in many small pieces that are completed in a period of time and at one level. This naturally causes the rapid movement of the warrants in the field. Increase the "ribbon speed" Such an event occurs only in the stock line when a large player enters the market.

3) The weakness of the buyer or seller orders - In many cases, the need to change the trend is not necessarily the largest player to enter the market. Sometimes the price is shaky because it is very cheap/expensive to make the buyer/seller pay his warrant. If the price goes up for a long time and at a certain level, we see that the buyers' orders are reduced and after some time the buyer disappears from the market, it is worth to know that the price starts to come down to find a buyer and thus deal with the deal.

4) Large limit warrants activity in the DOM - when the price goes to the large limit on the DOM, how do the buyer/seller behave? Will the price instantly slump down from the given level if it is long? The price level is not reduced dramatically as you approach the limit order volume? The answers to these questions will allow us to determine if a player is actually playing this game.

As you can see, using a trademark and DOM module, the trader can significantly improve its trade.