starting to get some professional buying but the smaller timeframes are in a breakout to the downside. When I get an END on the small timeframe I'll take one off. Since I got the setup on the highest timeframe I'll be monitoring those for the remaining contracts.
You know, I often feel that such spikes where large orders are there one second and gone the next are signs to 'fade' it.
I think they are screwing with algo traders who are looking at depth for part of their trading decisions.
Too many times when I see a huge block of orders on the bid appear out of nowhere, initially giving you pause thinking that they will "hold it up" or prevent price from dropping, what ends up happening is the orders are pulled and price does indeed drop.
I think a more telling sign is when the bid reaches extremely few contracts, or even no contracts, yet the Last will not pierce the bid. This is clearly a sign of a large institution pulling out the big guns to buy everything necessary to prevent price from moving 1 tick lower. And this is usually a sign the market will indeed head higher.
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As with anything I think there are not any clear cut black & white rules such as fade spoofing. It all depends on the intent of the market participant. For example, let's say price is at 80.00 and I offer 10 at 80.04. I can put bid 100 at 79.98 and scare shorts so they stop driving price down and entice longs into leaning on my bid. Price goes up, I get filled at 80.04 and then I start hitting the bid to drive price down.
Now another scenario: price is at 80.03, longs are in control so I offer 100 at 80.06 and I offer 10 at 80.04. Longs see the 100 and back off, shorts see it and join me at 80.04 I then pull my offer at 80.06.
That's two different scenario and in one case you fade it and in the other you lean on it. So knowing which to do depends on reading the dom & order flow. It takes a lot of practice. I don't want to sound like an expert, I'm really new at it and I'm observing the dom in between trades so I can learn it. Observing it and being able to profit from it are two different things.
My feeling is that more often spoofing (didnīt know that there was a word) is weaknes. A last resort before SL. Of cource, maybe som suckers fall for it but usually itīs better to fade it. Off course the trick is to recognize that its just a flash from 1 participant and not just many participants seeing the same opportunity. I donīt rely that much on DOM but i view it as the "poker table". Most of the time the pros will keep their pokerface but sometimes they reveal their weakness.
For instance a imbalance in the best bid/ask but without movement could be a some one accumulating through algo execution. For instance u se 100 at the bid and +500 at the ask still the bid side remains 100 even when sellers get aggressive and start hitting the bid.
Or a sudden imbalance in the orderbok where u suddenly se 5000 buyers and 10000 seller. That would give me confidence in a long position. Off course context is crutial. Where is that extra 5000 seller. Usually 1-2 ticks above best ask. Is this level a "known" level?
I made a example a while ago. Price bust trough the low of the day before and rotates back up. In the weakest moment when the bid side shows 10-40 contracts the ask goes from 127 to 1165 contract. A 1000 lot appearing in premarket is a really big lot. But u have to ask your self why does a big player whant to sell 1000 contracts in one lot. If he truely belives that it will go down he will hide his intentions to get the best price and sell in smaller lots. Just flashing a big order where it canīt get hit just shows that the guy doesnīt want to commit. I this example, as soon as 1 lot is executed on the ask it dissapears. This is replay. It happend som fast and i was trading so i coulden record it live.
Iīve done lot of sim just with the DOM just to lean what makes the market tick. One thing i did was just hitting the market when i saw big balances for a 1:1 trade. And it was more profitable to fade it. Also, everytime i enter a trade i take a sceendump of my chart and the DOM. That way i learned not to fear a great imbalance in the orderbook.
But like I wrote contex as always determinates. What is a big lot? Bottoms and topps usually have a greater activety in the orderbook on booth sides. The liquidity kills the volatility. If i see lots of contracts at a level that i expect a respons i respect it.
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Mission Impossible: Trade the DAX during the European Summit
I had to take the pill.
First off there were two big moves and I missed them both by a few ticks. I saw it setting up but by the time I confirmed with my charts, it was too late. in this case chasing would have worked but I don't do that so I just sat out.
Then the dax went into a tight trading range, kind of like yesterday. I saw 3 more scalp setups but again I was too slow to get in.
Then the dax started slowing down and I was able to get in. There is an old saying, something about if the market lets you in then you don't want to be in. That was true today.
Towards the end I started focusing real hard and I managed to climb out of most of the losses but not totally and that's when I took the cyanide pill.
So lessons learned today:
- stay out when in a really tight range. I love trading ranges but not when it's like wearing pants that are two sizes too small.
- go with my intuition instead of checking all my charts and indicators for confirmation. enter and then just get out if I see a lack of comfirmation. This will only work if I pre-qualify each setup and know the state of my charts before the entry
- two full stops will wipe out lots of small gains. it wasn't a question of discipline it was that they went pretty fast with no pullback that I usually use to get out
The following user says Thank You to cunparis for this post: