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Need help!

  #11 (permalink)
Posts: 8 since Sep 2018
Thanks: 4 given, 7 received

matthew28 View Post
So many questions so I will just mention a couple of things that jump out for me.
I am not keen on the term fake order. You will know from your own account that a broker requires margin for a trader to place an order, therefore a trader who is putting up a large order on the DOM has to have the money to cover that 100/500/1000 contracts or whatever. On a thin order book like the 6E in your picture 100 contracts would be noticeable, with Crude you get people putting up 300/400/500 , in the 10 yr Notes it will need to be at least a thousand contracts, to even be noticeable. So even a small order of say 100 contracts on a product with $500 margin is going to need $50,000 in the account to cover it (and they will want to have a lot more than that so that it is not a problem if the order gets filled. Therefore anybody putting up large orders probably has a lot more money and is a larger trader that most of us so I think it is worth knowing if they are active in an area.

Also it isn't as simple as saying that if there is an imbalance price will move away from it. Sometimes in the commodities for example you might see the large commercials laying out their orders in the book at the price they want to do business and that will attract price to those levels because somebody who wants to buy large size knows that they can get their orders through without moving price too far against them as they have a large seller sat there who should absorb the size they want without going up any further. My understanding anyway.

Like you say, the volume actually being traded is the most important thing but the order book is useful at times to understand the context of what has traded. There is a difference in selling between price moving up to a large offer that everybody can see and an aggressive buyer taking it, to price moving up towards a large offer and then an iceberg sucks down all the aggressive buyers before price even reaches the large offer. That suggests a large passive seller that wants to get in earlier at a lower price because they are not sure they will be able to get filled higher as they are concerned buyers may not actually want to trade in size that much higher. That might make other buyers pause for thought.
Unfortunately as with all things in trading it is very hard to make hard and fast rules because one time the market does something and you want to buy, the next time you see it and you want to sell. Context is king.
Just my 2 cents.

Hey Matt!
Thanks for your reply and I'll try to keep up!
Glad you've answered and mentioned some things that I have questions about!
Wouldn't you mind my asking ?
1. "Fake orders".
I am agree with you on requirements that traders have to meet to place their money at any exchange. These orders are definitely real and money that stands behind them is real. I use the term "fake" with slightly different meaning and this is it: "fake orders" are never intended to be triggered. People (or algorithms) that set them are "faking it". These orders are being put into market to add liquidity to the market, to make it look more thicker and (of course) to trick some traders into thinking that there is liquidity on some levels (it IS there for now really) but this liquidity is never intended to be triggered (not yet). And when price gets closer to those bulks of orders they get cancelled just 1-2 ticks off them. Pulling /Stacking column on DOM shows how in 1-2 seconds these places get emptied by pulling away all the orders that were sitting there. Also, as you said, the converse is true -bulks of orders can attract participants to doing business in those areas.
I think that's a little different topic I am beginning to dig into right now (how Bids and Asks work in our DOMs and how you need to interpret information you see) and never-ending changing / pulling & stacking is an absolutely normal process for any exchange but I just wanted to point out on specific places in order book where, as people might think, there is liquidity, but essentially, there is none. Well, you'll never know... And I accept that.
2. Why is 6E so thin?
This is EXACTLY that bothers me so much. How come that futures contracts of the biggest OTC currency traded market of the World has so pathetic numbers of contracts in DOM? Whilst ES has a few thousand contracts on each tick we (6E futures) have only miserable tens of contracts at each level (plus a few tens when NY gets open) How is it even possible to look so small? Does that really mean that futures traders are not really interested in this market due to their experience and knowledge? Does that mean that they find it difficult to trade 6E due to ambiguity of this product? The product that only follows blindly FX spot market.

Last edited by AndrewChuraev; July 9th, 2019 at 02:24 PM.
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  #12 (permalink)
Posts: 454 since Jun 2016

If you want to learn DOM trading i suggest you take a look at jigsawtrading they have courses and also a lot of free content on their website.

Also check out Axia futures on YouTube.

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  #13 (permalink)
Wiltshire, United Kingdom
Experience: Beginner
Platform: Jigsaw daytradr
Trading: US Equity Index Futures
matthew28's Avatar
Posts: 815 since Sep 2013
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I don't disagree with your first point at all, I was just emphasizing that 'spoof' orders are still worth being aware of because the people doing them need a large account to be able to place them and risk them being hit, and size matters.

I haven't looked at currencies for ages. The 6E certainly looks thin considering the Euro is the most traded product. You say it is an hour before the UK open which is when I believe the European markets open, so not out of hours.
The CME did start to introduce an extra decimal place on price for a lot of their currencies, similar to what the spot forex markets have had for ages. So the Euro used to have one tick as from 1.1142 - 1.1143. Now that have halved that with it being two ticks, 1.11420 - 1.11425 - 1.11430. I assume that reduced the size at each level. I think the Euro was the first one they did though and I thought it was a year or two back. I'm afraid I am not much help on that.

And there is the E7 mini Euro which I had forgotten about. Though looking at the volume right now, midday Eastern time, 93,000 contracts volume in the 6E and 2,000 in the E7, I guess all the Euro traders didn't go over there

Trading, ideally structured, is a vehicle for expanding consciousness, not damaging it. - Brett Steenbarger

Last edited by matthew28; July 9th, 2019 at 12:00 PM. Reason: E7
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