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Trading the DOM
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Trading the DOM

  #11 (permalink)
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hamster64 View Post
..Is there any correlation between the futures contracts trading (Dax or otherwise) on the DOM & say a Dax CFD or spreadbet ? I'm assuming they're ticking over with the same amounts on the futures platform unless I have it incorrect..

I have never looked at the Dax so wouldn't like to say. But if you look at the currency futures contracts, which I have looked at, they move almost identically to the forex spot currencies (The exact prices don't match between the forex and the future but the price movement will be pretty much identical), due to the fact that the liquid markets are now computerised so they all stay inline because of High frequency arbitrage traders. For example If the Euro spot forex contract was lagging the Euro futures contract then spread traders would step in and buy the forex and sell the future looking for them to converge. Therefore the same product on different exchanges or markets should move together.

ps Goodluck johnifx on your journal. Sorry for the digression.


Last edited by matthew28; June 19th, 2016 at 07:26 AM.
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  #12 (permalink)
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matthew28 View Post
I have never looked at the Dax so wouldn't like to say. But if you look at the currency futures contracts, which I have looked at, they move almost identically to the forex spot currencies (The exact prices don't match between the forex and the future but the price movement will be pretty much identical), due to the fact that the liquid markets are now computerised so they all stay inline because of High frequency arbitrage traders. For example If the Euro spot forex contract was lagging the Euro futures contract then spread traders would step in and buy the forex and sell the future looking for them to converge. Therefore the same product on different exchanges or markets should move together.

ps Goodluck johnifx on your journal. Sorry for the digression.

Spot on - Arb traders keep them in line but saying that - if you want to watch Futures order flow but trade cash forex or an index CFD/spread bet - I'd consider keeping it to something less volatile than DAX personally.

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  #13 (permalink)
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trading the DOM


Some points to note when making trading decisions on a DOM.

Firstly ask yourself why someone would show their size openly on a DOM or ladder? In the vast majority of cases they don't. The players in the market that trade size fill using algos, vwap, iceberg, growler etc, they don't show their size. Sometimes you do see the occasional size order in the DOM, imo these are often spreaders, uninformed larger traders or traders trying to spoof/influence others. Maybe if you look at the front month calendar (the roll trade) you can identify buying/selling pressure, these are real traders needing to get business done.

Second, I have spent a lot of time trading spread futures in prop firms. Seriously if you want to spend time analysing a DOM (and I dont!) to make trading decisions there are far better places to be looking than the front month of a very liquid futures contract. There are still a few markets out there where the size in the DOM can mean something, for example the middle and back of commodities futures curves or lesser traded commodities like sugar/cotton. In the former you will have some price insensitive traders who need to get their business done, even then most will not leave their size out there for all to see.

Finally trading is about longevity. It is likely going to take you decades to master unless you are lucky enough to come from a trading family or know someone willing to help you who has specific industry knowledge. With that in mind I would say staring at DOMs and T&S is not going to stand the test of time, you will burn out. Nearly all the guys I know who are making it have transitioned to not looking for ticks, if they day trade they look to take a proportion of the ADR or swing trade/ or a mixture of both. Trust me after years of staring at DOM's you will burn out, unless you trade something really slow moving like STIRS or perhaps 1 month flys in commodities (which i dont recommend!)

GL.

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  #14 (permalink)
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and another thing on FX futures

PS - I see reference to looking at order flow on FX futures. Honestly I would not go there. The volume in FX futures is tiny compared spot FX. Analysing the DOM and volume in FX futures is absolutely meaningless imo. Spot FX is kept off exchange for good reason.

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  #15 (permalink)
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londonkid View Post
Some points to note when making trading decisions on a DOM.

Firstly ask yourself why someone would show their size openly on a DOM or ladder? In the vast majority of cases they don't. The players in the market that trade size fill using algos, vwap, iceberg, growler etc, they don't show their size. Sometimes you do see the occasional size order in the DOM, imo these are often spreaders, uninformed larger traders or traders trying to spoof/influence others. Maybe if you look at the front month calendar (the roll trade) you can identify buying/selling pressure, these are real traders needing to get business done.

Second, I have spent a lot of time trading spread futures in prop firms. Seriously if you want to spend time analysing a DOM (and I dont!) to make trading decisions there are far better places to be looking than the front month of a very liquid futures contract. There are still a few markets out there where the size in the DOM can mean something, for example the middle and back of commodities futures curves or lesser traded commodities like sugar/cotton. In the former you will have some price insensitive traders who need to get their business done, even then most will not leave their size out there for all to see.

Finally trading is about longevity. It is likely going to take you decades to master unless you are lucky enough to come from a trading family or know someone willing to help you who has specific industry knowledge. With that in mind I would say staring at DOMs and T&S is not going to stand the test of time, you will burn out. Nearly all the guys I know who are making it have transitioned to not looking for ticks, if they day trade they look to take a proportion of the ADR or swing trade/ or a mixture of both. Trust me after years of staring at DOM's you will burn out, unless you trade something really slow moving like STIRS or perhaps 1 month flys in commodities (which i dont recommend!)

GL.

It appears you are focussing on one aspect of the DOM, which is the resting orders. But that shows intent, and intent can definitely be manipulated.

However, traded volume is another matter entirely. You can make informed trading decision by looking at traded volume as an aid.

With this I'm not suggesting that Order Flow is the be-all and end-all of trading. But dismissing it outright is quite unwise.

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  #16 (permalink)
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londonkid View Post
PS - I see reference to looking at order flow on FX futures. Honestly I would not go there. The volume in FX futures is tiny compared spot FX. Analysing the DOM and volume in FX futures is absolutely meaningless imo. Spot FX is kept off exchange for good reason.

Again, it sounds like you're just looking at one aspect of the DOM. There are people that look at the tape (Time and sales) and seem to be quite comfortable in doing so for thinner markets.

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  #17 (permalink)
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xplorer View Post
It appears you are focussing on one aspect of the DOM, which is the resting orders. But that shows intent, and intent can definitely be manipulated.

However, traded volume is another matter entirely. You can make informed trading decision by looking at traded volume as an aid.

With this I'm not suggesting that Order Flow is the be-all and end-all of trading. But dismissing it outright is quite unwise.

yes my post was focussing on one aspect of the DOM the resting orders in the book. Traditionally DOMs or ladders only showed price, last traded price/size and resting orders. I know there is all sorts of funky software to show additional info now. I totally agree with you about traded volume and like you I believe it can be used to make trading decisions. Personally I believe it to be useless for FX futures though for reasons i stated above.

For the last 5+ years I have only traded using price, that's it, prior to that I used all manner of stuff, I didn't know what i was doing. I am not saying other methods don't work, there are many ways to find an edge.


GL

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  #18 (permalink)
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londonkid View Post
PS - I see reference to looking at order flow on FX futures. Honestly I would not go there. The volume in FX futures is tiny compared spot FX. Analysing the DOM and volume in FX futures is absolutely meaningless imo. Spot FX is kept off exchange for good reason.

I was referring to FX futures purely to illustrate whether essentially the same products are likely to move in step with each other, as Hamster64 asked, such as the Euro future and the EUR/USD spot currency, in reply to his question about the DAX future and the DAX with a spreadbetting or CFD firm.


Last edited by matthew28; June 20th, 2016 at 10:27 AM. Reason: spelling
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  #19 (permalink)
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Less volatile


DionysusToast View Post
Spot on - Arb traders keep them in line but saying that - if you want to watch Futures order flow but trade cash forex or an index CFD/spread bet - I'd consider keeping it to something less volatile than DAX personally.

John Grady suggests the treasuries..Maybe the dollar index..What would you suggest in terms of less volatility ?

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  #20 (permalink)
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Cable breaks


This video is from yesterday. I just saw that cable breaks down seriously on my charts so I quickly opened the 10 min delay TT platform to try to trade it.

its less than 4 mins

Actually it is a bit more effective than recording the whole session: if I see something interesting or a pattern I quickly open the 10 min delay and record it. Its like a futex drill but .. well ...my own amateur free drill collection

so.. would you been able to fade it?

( dont worry about the music... i use screencast o matic and i forgot to turn off the mic so it just recorderd all the noise in my room.. had to replace it with music.)


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