Tracking order flow through the Depth of Market (DOM) can provide valuable insights for trade directions and avoiding unwanted market movements.
Reflecting on personal trading experiences and adjusting strategies can enhance decision-making and overcome challenges in bullish markets.
Monitoring bid and offer sizes near price levels using the DOM can signal potential trade opportunities or reversals, aiding in trade execution strategies.
Deep dives
Analyzing Institutional Order Flow for Trading Advantage
Understanding how institutional money moves and reading professional order flow can guide trading decisions positively. Tracking order flow through the depth of market (DOM) provides insights into potential trade directions and helps avoid unwanted market moves. Monitoring institutional actions and interpreting order flow correctly can lead to more profitable trades.
Challenges and Learning Opportunities During Trading
Navigating the challenges of shorting in a bull market showcases the need for swift adjustments in trading strategies. Reflecting on personal trading experiences and taking breaks to reassess and adapt approaches can lead to improved decision-making. Recognizing the psychological impacts of fear and ego in trading can enhance trading discipline and overall performance.
Utilizing Depth of Market for Trade Entry and Exit Strategies
Using the DOM for trade entry and exit strategies involves monitoring key areas for pattern recognition, such as pulling and stacking of bids and offers. Identifying significant bid and offer sizes near price levels can indicate potential trade opportunities or reversals. Incorporating pattern recognition and monitoring time and sales data can provide valuable insights during trade execution.
Understanding Order Flow and Order Flow Tools
Order flow is a tool that helps traders quantify the quality of their trades rather than find new trading opportunities. Traders should already have an idea of where they want to enter trades based on factors like price structure, volume profile, and other tools before using order flow. The discussion emphasizes that order flow is not about finding trade entry points but rather clarifying decisions traders have already made.
Icebergs and Hidden Liquidity in Trading
Icebergs are a type of hidden order used by market participants to execute trades without revealing the full size upfront. These orders are not displayed on the order book but can significantly impact the market when executed. Identifying icebergs can provide trading opportunities, especially when they are positioned at key levels in the market. Traders often observe icebergs to gauge market sentiment and potential price movements.
Want to learn how to find out what traders are doing? This is called following the smart money, and order flow is a key analysis tool to help you gain an edge on the market.
In today’s episode Leo and I discuss our trading into the end of the year, and openly share some of our personal struggles with our trading. More importantly, we go into details on finding the problem and helping each other fix the issues.
We then move into the topic of using the DOM (or price ladder). This is a tool that allows you to see EVERY order that trades through the book. This is a big advantage to find continuation or turning points in the stock market, and to trade with the momentum.
We get down into the nitty gritty details of how to use this tool, and discuss the following in this episode:
What is the Order Book
Visible Liquidity
Big Inventory as a Magnet / Target
Why is a big sell order above a bullish thing?
Why is a big buy order below a bearish thing?
Hidden Liquidity
This was an incredibly fun episode to record with Leo, an amazing trader and all round great person to talk trading with.
We look forward to seeing you at our third installment of Between the Spread series on our podcast. Just a reminder, new episodes of the series are released on the first Thursday of each month.
Thank you so much for listening and have a wonderful day.
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