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Ninja Trader Custom Order Book - 1LDom - Source Code
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Ninja Trader Custom Order Book - 1LDom - Source Code

  #181 (permalink)
 Vendor: the1lottrader.com 
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Thanks @Silvester17, a great post and well illustrated with the images. Also a very typical example of a DOM trader fading one side of the range and getting out at the other. The V Profile in that shape is a very nice example of what a range tends to look like in a DOM. As price cycles up and down to the extremes the most amount of trades tend to accumulate around the centre at 1400. As price moves away from the centre (Point of Control) there is lower interest (lower liquidity) and price is snapping back. The profile in this situation very much resembles a standard bell curve or D shape.

When this type of profile is developing it can often tell you what is the mood of the day, who is currently operating. Usually in my experience it is a thin market with mostly locals/prop traders trading and trying to fake each other out on the outside of the ranges. Paper and large players tend to create a different kind of action and profile. If you see this profile setting up and you have seen it many times before it is a good base from which to guide your strategy for the day and avoid getting faked out. Generally myself I will avoid like the plague taking any position anywhere near 1400. That is suicide area because you will be squeezed out of your position at the boundaries and some other smart guy will take it off you, fading your stop at the last moment. The boundaries offer the best point for a strong position from which to have a number of options whether to bail or hold etc.

I do not trade strictly scalping on DOM and always am aligning with a larger/longer term view so if I am only looking for the short side on this particular day I will just fade the high side of the range etc. but the concept is still the same. The key is to watch the outside levels 1403/1397, watch the bids and offers, how much volume is actually going through and see how early can you spot whether it is going to reverse. Bearing in mind that the market will do it's utmost to convince you each time it is going to run. The climax that you see as it touches and what here has resulted in a pin downside, pin upside, those last guys out are stops that were squeezed. Watch for signs of that happening at the time, sometimes small air pocket and then fade those stops.

Not to profess to be an expert, as I said just to offer my own observations over time.

1Lot

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  #182 (permalink)
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One other thing which just occurred to me and I will add here since we are now talking of the actual use rather than purely technical.

I'm not sure if you are sim trading or live on this at the moment, if you are sim trading it then ensure that you get the fills, watch the bid and offer values and make sure it would have traded through in terms of your position entries and exits. The default Ninja Simulation fill algorithm is daft and will give you some glorious fills that are not possible in live, essentially it's a touch once, even if you are 600 or something in the queue.

If you don't take a conservative line on it you will create a skew on your figures that will leave you scratching your head when you cannot replicate the Sim situations in Live. With pure scalping it will be particularly misleading.

It was a hard lesson I had to learn for myself.

1Lot

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  #183 (permalink)
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@Silvester17's comment picked my curiosity and i think i'll install the tool on my secondary comptuter. However i was wondering, when price is in a mode of absorbtion at a range boundary most of the time price will form a pin bar (small head, big tail). What difference does it make to look at big numbers at one side of the boundary absorbing the other side from going outside the range and looking at the pin bar as a visual representation of this phenomenon? In his thread Vince have many examples of this and was wondering what advantage do you really see here which is not already visible at the candlestick level? Even more so if you did a good job in identifying key levels of supply/demand.

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  #184 (permalink)
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@trendisyourfriend , I cannot speak for @Silvester17 but I'll give you my take, I personally do not wait for confirmations. So yes the candle formation can be seen on the chart but it is an after the fact signal, I mentioned it to illustrate what actually took place but at the time of trading it is worthless, when I trade a range reversal in the book, I am not looking for a candle to set up and then hit it, I'm looking for the action before the pin candle, I want to see stops being run and I want to fade into them, yes you are right, a candle will form most of the time but that is the beauty of it, I then have options, an edge in the book for a good entry means that almost immediately after entry you are on side and you can scratch at break even. This is what some refer to as "buying or selling wholesale". When candles form I want to be in the wick. Not getting in under or above the head.

The typical retail entry is to wait for the head to form and then look to be taken in with a stop - the worst possible entry, think about it, for one thing second tests are common even if it's going to reverse. Another thing as you rightly pointed out candles will often form even when it's going to breakout. That is why waiting for the candle is the crap play, you are almost always immediately under water. Secondly what does a pin candle tell you? price went up and then it went down.. What about the volume? what about the bids and offers at the time?

In my experience it is often the case that the earlier I am in the more options I have to get out if it's not going to work. This is what the book does for you, it allows you to take a magnifying glass to the market and get in before everyone else. The caveat of this is that it takes balls, you will be doing your buying and selling at a time when it looks the absolute worst and makes you feel a bit sick to get in. This is entirely the point. It is the same point at which the guy under water is feeling like he is ready to throw up and gives up his position.

Sure you could go to a faster candle chart and look for patterns but when you are looking to be the first guy in you want to be able to see all info available to you at the absolute ground level, bid/ask/price/volume. How much is trading at each level. You just can't do it on a chart. At least I couldn't. I still use charts by the way, just differently, I use them for strategy in terms of defining my plays but if I'm looking to manage trades etc. then i am in the book watching there. You would need to use it for a while to see what I mean.

There is nothing really different in what I have said that hasn't been the case for the last 50 years. Exactly the same stuff was done in the pits. Those guys were not waiting for pin bars. If you want some more background on it have a look at a video on my blog or you might be able to find it on youtube by a guy called charlie D. If you watch from about part 6 to part 10. You will hear some really interesting things, stuff such as "painting a high ball" or "it hurts to be a commodities trader, when your a good commodities trader everything that you do hurts".. these are key statements and still very applicable to book trading today.

Anyway I hope I didn't ramble to much and at least answered some of your question.

1Lot

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  #185 (permalink)
Market Wizard
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1LotTrader View Post
Thanks @Silvester17, a great post and well illustrated with the images. Also a very typical example of a DOM trader fading one side of the range and getting out at the other. The V Profile in that shape is a very nice example of what a range tends to look like in a DOM. As price cycles up and down to the extremes the most amount of trades tend to accumulate around the centre at 1400. As price moves away from the centre (Point of Control) there is lower interest (lower liquidity) and price is snapping back. The profile in this situation very much resembles a standard bell curve or D shape.

When this type of profile is developing it can often tell you what is the mood of the day, who is currently operating. Usually in my experience it is a thin market with mostly locals/prop traders trading and trying to fake each other out on the outside of the ranges. Paper and large players tend to create a different kind of action and profile. If you see this profile setting up and you have seen it many times before it is a good base from which to guide your strategy for the day and avoid getting faked out. Generally myself I will avoid like the plague taking any position anywhere near 1400. That is suicide area because you will be squeezed out of your position at the boundaries and some other smart guy will take it off you, fading your stop at the last moment. The boundaries offer the best point for a strong position from which to have a number of options whether to bail or hold etc.

I do not trade strictly scalping on DOM and always am aligning with a larger/longer term view so if I am only looking for the short side on this particular day I will just fade the high side of the range etc. but the concept is still the same. The key is to watch the outside levels 1403/1397, watch the bids and offers, how much volume is actually going through and see how early can you spot whether it is going to reverse. Bearing in mind that the market will do it's utmost to convince you each time it is going to run. The climax that you see as it touches and what here has resulted in a pin downside, pin upside, those last guys out are stops that were squeezed. Watch for signs of that happening at the time, sometimes small air pocket and then fade those stops.

Not to profess to be an expert, as I said just to offer my own observations over time.

1Lot


great explanation, spot on. thanks @1LotTrader

hopefully others will join too.


1LotTrader View Post
One other thing which just occurred to me and I will add here since we are now talking of the actual use rather than purely technical.

I'm not sure if you are sim trading or live on this at the moment, if you are sim trading it then ensure that you get the fills, watch the bid and offer values and make sure it would have traded through in terms of your position entries and exits. The default Ninja Simulation fill algorithm is daft and will give you some glorious fills that are not possible in live, essentially it's a touch once, even if you are 600 or something in the queue.

If you don't take a conservative line on it you will create a skew on your figures that will leave you scratching your head when you cannot replicate the Sim situations in Live. With pure scalping it will be particularly misleading.

It was a hard lesson I had to learn for myself.

1Lot


yes, absolutely true, sim and live are two different pair of shoes and can be very misleading.

I was very fortunate with my exit. I did set my target as soon as I entered the trade. sometimes if necessary (not in my example) I'll adjust that target as the trade progresses.

I do trade live, but day trading futures is not my primary source of income. and also I normally don't trade big size either.



1LotTrader View Post
@trendisyourfriend , I cannot speak for @Silvester17 but I'll give you my take, I personally do not wait for confirmations. So yes the candle formation can be seen on the chart but it is an after the fact signal, I mentioned it to illustrate what actually took place but at the time of trading it is worthless, when I trade a range reversal in the book, I am not looking for a candle to set up and then hit it, I'm looking for the action before the pin candle, I want to see stops being run and I want to fade into them, yes you are right, a candle will form most of the time but that is the beauty of it, I then have options, an edge in the book for a good entry means that almost immediately after entry you are on side and you can scratch at break even. This is what some refer to as "buying or selling wholesale". When candles form I want to be in the wick. Not getting in under or above the head.

The typical retail entry is to wait for the head to form and then look to be taken in with a stop - the worst possible entry, think about it, for one thing second tests are common even if it's going to reverse. Another thing as you rightly pointed out candles will often form even when it's going to breakout. That is why waiting for the candle is the crap play, you are almost always immediately under water. Secondly what does a pin candle tell you? price went up and then it went down.. What about the volume? what about the bids and offers at the time?

In my experience it is often the case that the earlier I am in the more options I have to get out if it's not going to work. This is what the book does for you, it allows you to take a magnifying glass to the market and get in before everyone else. The caveat of this is that it takes balls, you will be doing your buying and selling at a time when it looks the absolute worst and makes you feel a bit sick to get in. This is entirely the point. It is the same point at which the guy under water is feeling like he is ready to throw up and gives up his position.

Sure you could go to a faster candle chart and look for patterns but when you are looking to be the first guy in you want to be able to see all info available to you at the absolute ground level, bid/ask/price/volume. How much is trading at each level. You just can't do it on a chart. At least I couldn't. I still use charts by the way, just differently, I use them for strategy in terms of defining my plays but if I'm looking to manage trades etc. then i am in the book watching there. You would need to use it for a while to see what I mean.

There is nothing really different in what I have said that hasn't been the case for the last 50 years. Exactly the same stuff was done in the pits. Those guys were not waiting for pin bars. If you want some more background on it have a look at a video on my blog or you might be able to find it on youtube by a guy called charlie D. If you watch from about part 6 to part 10. You will hear some really interesting things, stuff such as "painting a high ball" or "it hurts to be a commodities trader, when your a good commodities trader everything that you do hurts".. these are key statements and still very applicable to book trading today.

Anyway I hope I didn't ramble to much and at least answered some of your question.

1Lot

again spot on. not much more to add. the big advantage is you can enter early and therefore you don't need a big stop if you're wrong like I was today (2 ticks loss).

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  #186 (permalink)
Elite Member
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1LotTrader View Post
...The typical retail entry is to wait for the head to form and then look to be taken in with a stop - the worst possible entry, think about it, for one thing second tests are common even if it's going to reverse. Another thing as you rightly pointed out candles will often form even when it's going to breakout. That is why waiting for the candle is the crap play, you are almost always immediately under water. Secondly what does a pin candle tell you? price went up and then it went down.. What about the volume? what about the bids and offers at the time?
...

That's how i try to enter. The bar has morphed into a pin bar, in a scenario where price is "bottoming up", i want to place a limit buy order to catch the second test you have mentionned. In such a case, how would i improve my situation if i were to use an enhanced DOM?


1LotTrader View Post
...
In my experience it is often the case that the earlier I am in the more options I have to get out if it's not going to work. This is what the book does for you, it allows you to take a magnifying glass to the market and get in before everyone else. The caveat of this is that it takes balls, ...

I agree that the earlier you get in, the easier it is to scratch the trade without too much damage but since you are an early buyer/seller your entry level has a higher chance to be tested one or more times before going in your direction. In this case, are we not in the same situation as described above (pin bar + second test/pullback) or do i miss something?

Here is a chart of the CL and where i would have contemplated an entry. There are more trades than i would normally take but i wanted to show that key locations and simple bar formations can reveal quite a lot. It is just that i would not know how i could look at the enhanced DOM while focusing on the main trading chart where i define my key locations and execute and manage the many trades.

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  #187 (permalink)
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Question to anyone that uses this tool:

What advantage would this tool have given in this scenario that occured earlier today. Price Pulled back to the open of the regular day session. Some traders took the short there thinking it was a simple pullback. I would like to know if this tool could have helped to filter the action around this price to avoid the short?

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  #188 (permalink)
Market Wizard
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trendisyourfriend View Post
Question to anyone that uses this tool:

What advantage would this tool have given in this scenario that occured earlier today. Price Pulled back to the open of the regular day session. Some traders took the short there thinking it was a simple pullback. I would like to know if this tool could have helped to filter the action around this price to avoid the short?

I was one of those victims as you can see in my post above. the funny thing is, I don't even like those trades in the "middle", close to vwap and poc. anyway as also mentioned, the good thing with that tool, it cost me only 2 ticks.

on a brither side, nice sell signal on the top. can't show the dom with a picture (would need a video), but the ladder shows it pretty good too.

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  #189 (permalink)
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I looked at the ladder in your example and honestly, the spot you refer is not any different than what i can see at various places on this chart. What pattern do you see at the top (not sure if that is the case as i can't see the Y axis) that is different from all these other places? Is it that the ask side shows the numbers in decreasing order? Is this the pattern you are poiting out?


Silvester17 View Post
I was one of those victims as you can see in my post above. the funny thing is, I don't even like those trades in the "middle", close to vwap and poc. anyway as also mentioned, the good thing with that tool, it cost me only 2 ticks.

on a brither side, nice sell signal on the top. can't show the dom with a picture (would need a video), but the ladder shows it pretty good too.

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  #190 (permalink)
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@trendisyourfriend , 1st touch or 2nd touch - it is not a one size fits all scenario, it's like tennis, what is better the back hand or the forehand? depends maybe what opponent you are playing. It is my observation that the character of certain markets is quite different from one another, I mean I trade Bund and there is a lot of hedging and spreading activity that goes on between the Bund/Bobl/Schatz, character of the market can be different at different times on different days and some instances a certain character can prevail for like a 3month period and then suddenly change. So I do not like hard and fast, this or that is the right way because it is not for me how it works. I very much think if you trade discretionary it is about getting into a state of flow and then working from there.

Of course all needs to be governed by a master risk control plan and I have certain key things I adhere to like I do not like selling in a downwave or buying in an upwave. So the 1st or 2nd touch for me both are fine so long as I'm selling while it's still in an upwave and not waiting for it to come off and then sell which is then limiting my options but mainly it is about developing a feel for the numbers, adhering to my risk control plan and then following some general guiding principles that I have learnt over time. The rest I finesse based on each particular scenario.

In the book, maybe you hit the 1st touch with the short and as soon as it breaks down you buy it back again and then resell into the second test, now you have reduced your risk on your initial to near break even and have some breathing room. Maybe you missed the turn but it looks good and so you hit the second test for the first time. Maybe you are in at the first turn, you don't like it and on the second test you scratch it.

That for me is trading, it is not a - I find a hammer and now everything is a nail type of thing.

Regards the chart verse book and which is better, for me trading without volume is madness but these days you can have volume on a chart so that is good enough but still a chart will split the market into random elements of time that do not necessarily have any bearing on the actual raw data stream, while the book is taking the raw data and structuring it in a manner that is readable without unnecessary time distortions. The thing is it is one of those things where you need to spend time to appreciate it, maybe for some it never works or maybe staring at the numbers is to boring etc.

Everyone is different, what works for me is a chart/book combo with charts for strategising where I am going to start my positions and then using the book to work it all the way to the end. Someone else is maybe straight scalping, someone else is doing something different. No-one can tell you what is right for you really, you need to try and see if it is the right fit.

1Lot

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