MARKET DEPTH – HOW TO USE DOM MODULE FOR MAKING TRANSACTION ON THE EXCHANGE

MARKET DEPTH – HOW TO USE DOM MODULE FOR MAKING TRANSACTION ON THE EXCHANGE


Market depth DOM (Depth of Market) - the integrated trading platform or a separate program in the form of the tool, which shows the layout limit orders, as Bid- is also Ask's side.


Pic 1 - Position of the order warrants in the DOM

The disadvantage of this instrument is that a large player uses manipulations and many traders have become victims of these actions. As a rule, a marketing tool uses a well-known method of manipulation called spoofing (spoofing).

During the spawn, a large player at a certain price level will place large limits on the DOM in order to create the illusion for the retailers that the market is going to start a movement in a particular direction. As soon as the small traders open the orders in this direction, the market makers receive a sufficient amount of liquidity than they instantly remove the DOM from this large limit orders as a result of their stop-loss orders, the price starts against the retailers, which makes a strong impetus and becomes more accelerated.

Because of this moment, most of the experienced traders did not use the DOM module as they considered it absolutely fair and useless. But not too long ago the application appeared in the market, which has ratified it and the aggregate stock DOM- tape synthesis, the so-called "Depth & Sales".


Photo 2 - Depth & Sales, a new DOM application

This application is the same as the traditional DOM, it shows not only the limit orders deployment of the instrument, but additionally provides information about the number of contracts performed in this or that level, after the price reached a certain level (in addition to the application of the volume profile). Accordingly, we have information on how many limitations are available on a certain level and then we have information about how much a contract has been signed by the price.

The difference between the quantity of the limit and the actual contracts placed at the price level gives the possibility to:

1. Do not get into the trap laid by a large player, do not become a spy victim;
2. Identify the marketing warrants by the market makers according to specific levels.
3. This application is especially effective for scalping and trading within the day.





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