Up to 90% of all posted quotes are HFT spoofed. L2 was once a good trader tool prior to around 2004 when HFTs came on the scene. IB sends snapshots of quotes - not exactly real-time. There are much better data feeds over IB if you want to avoid lag - but for a deep discount broker what can you expect.
On top of this, I would also add that the problem is that when you look at what is in the order book, compared to the trades that happen, its also a small fraction. With computers these days placing trades, it literally takes a micro second to add a limit order somewhere and execute a trade without having to already have had your order in. Being at the front of the line in the order cue just doesn't seem all that important with the ES for example, unlike maybe the bonds.
I don't have the tools, or even the inclination, but I would be curious to see how does, what is on the order book at each level, compare with what actually traded at that level. Suppose there is 500 offered, and 300 trades, so then you assume that 200 would be on offer left, but really, based on the way I see it, with my incredibly slow brain, I can't keep up with what is added and what is removed and I don't really see this reflected. I know jigsaw has the ability to this, but even then, I think its of little use because there just isn't much need to show you intentions in the market since it takes you a fraction of a second for a computer to put the order in. These orders can get refreshed multiple times, and pulled, and it happens thousands of times a second, so how does one keep up with that? (keep in mind that I am using IB data, and although I know its not accurate for bid/ask volume, when I compared it with a better data feed for a month, the DOM seemed to update roughly the same)
Put another way, what I might see as huge size sitting somewhere of 2000 contracts, and compare this with how much actually traded there, I think its much much higher of what actually trades at that level over several seconds (ie. it looks like 2000 is available, and yet over 5000 actually trades). Other levels that didn't even ever had a huge bid or offer sitting there can add up to also be big size over multiple touches, and this wouldn't have been anywhere in the order book visible in advance. Only once price gets there perhaps do these algos start buying or selling.
Now don't get me wrong, I use a version of Bookmap with my platform and find it interesting to see where the "thick" levels are, but as with anything in trading, sometimes it works and sometimes it doesn't. So ya, DOM trading these days is hit and miss I believe.
Edit: Opps.. since we aren't talking futures, which are obviously all on one exchange, then this gets very tricky with multiple exchanges. My observations are only for the ES.
