i am watching the DOM (Limit Order Book and executed Market Orders) for the ES for about 6 monthes now.
i am pretty near to a Burnout of my brain cells.
the resting bids and offers never reflect the true amount of resting Limit orders.
Once Price goes to a new Price, Limit orders drop very fast from lets say for example 1000 to 200-400.
Nevertheless sometimes at this new Level 2000 trades take place (refreshing orders), sometimes 200 shown and
1000 refreshing orders traded, sometimes more sometimes less, sometimes only just 100 are traded and on the next
Level is nothing traded, the Limit orders are pulled.
There are times when the sum of the 10 Levels is 15000, sometimes just 9000. at daily extremes more than in daily
range.
but it doesnt matter how thick the market is, the traded size at each Level is not dependant on the market depth.
i think the equity Indexes are pretty difficult to trade compared to stocks. in stocks you know that People buy for capital gains, but in equity Indexes People may buy for hedging purposes at one Level with iceberg orders, then they dont care anymore if Price goes higher or lower for the day. but in stocks a Price Level once identified has more power, and besides you can identify with Level 2 which market or specialist is buying/selling at which Level (NASDAQ,ARCA,INSTINET etc).
i mean the depth of market or Limit order book can give you more reliable Information. and in Addition you can use more markets for indication and confirmation. Eg only buy one stock when its future, index (SP500, NASDAQ), or other stocks from the same market (oil Company, finances etc) are also positive.
anyone who can share his experience with trading from the DOM and using it for his own trading successfully?