You might know it as the depth of market, the DOM, the order flow, the order book, the tape, or just the book – but it’s all the same thing.
The DOM is just a way of showing all the buyers and sellers and their respective limit orders ready to be executed.
The buyers (the bids) are on the left hand side and the sellers (the offers) are on the right.
The way I remember it is buy low, sell high.
The idea of trading with the DOM is also a relatively simple one.
If there are a lot of buyers and not many sellers – logic would suggest that prices will then rise.
Conversely if there’s a lot of sellers and no buyers then price must fall.
Basic supply and demand.
However when new traders first take a look at a DOM, it’s quite confusing and many can get a bit overwhelmed.
One of the best things about charts is their simplicity – however by nature they are a representation of things that happened in the past.
And of course we’re interested in what will happen in the future.
So when we use the DOM to trade we are basically looking for places where there are more buyers than sellers or more sellers than buyers.
The simple way to do this is just look for a bid (in the case of buying) or an offer (in the case of selling) that stays there and can’t get taken out.
Sometimes it can be as simple as there being a large buy order (bid) sitting right there for all to see, however that doesn’t happen so much these days as people have wised up to it.
So you need to look a bit deeper.
For instance if price continues to trade at 5493 – where there are many market orders getting executing at the bid – but the bid keeps on refreshing – then you know there is a buyer there.
It’s really as simple as that.
However it does take a while for your eyes to get used to spotting all the buying and selling.
Practice for a couple of days and in no time you’ll be able to see all the price movements right down to the tick and then you’ll really be able to trade like the pros.
Good Trading.
Hi there,
i am interested in learning how to trade futures market, do you provide any mentoring if so please could you send me more details
many thanks
Hey Jake
I don’t really do mentoring, however I’m going to be doing a pretty extensive video series quite soon on futures trading so hopefully that will be of some value.
If there’s anything I can help you with in particular to improve your trading or even where to start, please feel free to contact me with anything at all.
I’m happy to help.
Hi, that would be excellent can’t wait for the video, please can you contact me on my email: fx786@hotmail.co.uk as I do have a few questions on reading the DOM.
Many thanks.
Look forward to your email
Hi Jake
Not a problem. Happy to help with anything I can. I’ll email you now.
Cheers
RC.
What I have found is that the professional trader uses the DOM (order book) to read the market action and make his trades accordingly. Also I have found that there is very little out there on the web that addresses “How to trade using the Order Book.” There are some like Futexlive, John Grady, Jigsaw and Guy Bower but none that shows how to trade the “DOM” like the one you have done with the Buyer absorption video. It is sad and so bad that someone has not made a video on more games played on the “DOM” like this one. At any rate thanks for this one, it has been a BIG eye opener.
I’m glad the video was of some use mike b. Best of luck!
Hi RC,
Please post a link to the video Mike B is referring to.
Many thanks,
Hi Rico
I think this might be the one.
https://www.youtube.com/watch?v=8wCe8hzf0yQ
Cheers
RC.