Best way to use DOM to time tick scalps?

[bone]

So now I'm thinking I should just submit at the bid and the ask simultaneously as two seperate limit orders when the bids/offers are close to even.

This is essentially why the vast majority of floor traders had great difficulty transitioning to the screen.

As a floor trader, you are told that your job is to "buy bids, sell offers, and make markets". When I was on the floor, I would indeed bid and offer to the floor brokers. I insisted that the broker's customer pay up a tic to get into the market. The only way I gave that up that tic and hit a bid or lifted an offer was to scratch a trade, take a loss in a moving market, or get into a moving market. But I was also always looking for an immediate out. For example, let's say a market was 10 bid offered at 11. Let's say that a floor broker sold 100 lots @ 10 and I got 25 of them. I would immediately line up what other brokers were bidding at 10. Now, if 10's started to trade and I even smelled a hint of the bid drying up I would hit the bid of the nearest broker (hopefully). While I was a floor trader, I was also one of the first traders to use Project A which was an off-hours electronic trading system that ran on Sun Microsystems. I figured that the floor gave me about a half-second advantage over the screen - which is huge.

Independent traders who are victims of quote stuffing or spoofing are sheep. They believe what they see with their eyes and not what actually traded.

IMHO, the real problem with scalping electronic markets manually and in a retail setting where orders are routed through the ECN multiple times is threefold:

1. The big, liquid markets are usually filled via FIFO algorithm. This is based strictly on price and order entry timestamp. The earliest firm orders at any particular price are filled first. What's more, any changes you make to your existing working order (like quantity) automatically puts that order to the back of the order queue. Last. And scalpers are usually late in the order queue, which is not good.

2. Modern, current point-and-click scalpers who can keep up with the bots are extremely rare. They have a talent that I certainly don't possess.

3. Bids and offers for the most part seem to trade out and/or disappear in what seems like a flash. Just watch what happens when a size bid or offer starts to trade even modestly. In other words, the mere mortal and common manual scalper has nothing to lean on in terms of time.

IMHO this is likely a very tough way to trade these days. Just my own 2 cents, YMMV.

 

[pinabetal]

Just starting out, and I've realized, based on the DOM, that if I enter a buy at the bid order with a take profit 1 tick up, the TP order will only enter the book when my bid gets sold, and if my bid is at the end of the line, unless there is buying supporting behind me in line, that the bid/ask is just going to move down.

So now I'm thinking I should just submit at the bid and the ask simultaneously as two seperate limit orders when the bids/offers are close to even. Obviously an imbalance can always happen afterwards, but I theorize that this is more likely to succeed than the previous idea, where the take profit only enters the books after the first one is accepted.

Does anyone have tips they can offer?

Many times price will trade towards the wall for a couple of ticks before reversing. For instance, say there are 800 contracts on the offer and 200 on the bid price will many times trade up towards the 800 before trading down a tick or two. So you can grab a couple of ticks as it trades towards the wall. I think if trading off dom and you are using no charts it is best to look at scalping at least 1/2 to 3/4 point or commissions will eat you up after factoring in losses. Just extremely hard to do capturing just one tick of profit. In the example above one would buy on the bid at the 200 level and as it trades up two or three ticks one would exit.

Google john grady trader or go to nobsdaytrading dot com. i think he has a basic course for under 90 dollars that teaches some specific strategies to trade off the dom. However, you must watch the Dom and practice about 6 months for it to become second nature and to spot the senarios he describes.