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I have habitually been a Dom reader after getting into a trade and I watch the movement and the size on the bid/ask columns. I'm starting to believe this has been a psychological downfall for me because there can be someone or an institutional trader flashing large orders for head fakes. This had cost me in a long trade this morning. I went long on the 11:30 bar this morning and knew I only had about 20 ticks to the HOD. While watching the Dom and it moving a few ticks up and then jolt back against me several ticks I decided that I didn't like the trade any longer so I bailed out -5 ticks. It did go against me 15 ticks before it ran up for 72 ticks.
So, I am going to watch the chart only when in a trade. This has cost me to jump out of winning trades too many times. I did just that on the next trade off the new HOD and shorted on the L2 bar and had a nice winner for +10 +20.
I am very curious who watches the Dom when in a trade and who does not and why?
I use an indicator on NinjaTrader called Ed's Level 2, which plots the Level 2 data as a series of bars right on the chart. It is far superior to reading the DOM directly, because it displays the bid/ask data in a visual format as opposed to just numbers (which makes it easier to spot relationships between different levels), and also doesn't distract your attention away from the chart. You might find that using a tool like this allows you to read the level 2 better.
What you will find if you study this tool or something like it long enough, is that these "head-fakes" are actually indications that the price will continue in that direction. One large order at the ask with no volume behind it usually means a continued upward move. On the other hand, when multiple large orders are stacked and the offer to bid volume ratio is 2:1 or better, it means that those are real sell orders in place. You will never notice stuff like this on the DOM itself, especially if you also have to keep an eye on your charts.
I use a balance between DOM and T&S. With more consideration given to T&S. I am going to look for that Ed indicator, however...
These along with PA are essential for momentum signals...
IMHI
I have also learned not to beat myself up after exiting early on a winning trade... I tend to tighten my stop,
more than close out, a well battled postion these days, however.
Watching the DOM and the T&S is more to get a feeling if you are correct or not, we all know that level2 data is manipulated but T&S is not. That's why if you get a huge order on the wrong side of your trade in the T&S you might bail out of your trade early.
Trading is not a 100% game, you can't win them all.
