Quote from makosgu:
Rather than make a trivial comment like "that's neat" or "cool", I'd thought I would lay out a few items that are in similar vein to what you have realized. Our perspectives are a tad different and this may only be due to terminology and perhaps what we believe to be important and more importantly, when we believe these items to be important.
I, for one, have also come to really like the DOM. I had known it's intricacies for a long time and have recently acquired a good portion of it's efficacy as a tool for exacting when to take action. Whereas you see the DOM as a list of BUYERS and SELLERS, I see the DOM as a list of SHORTS and LONGS since if I want to buy a LONG with a MARKET ORDER, I have to check the ASK inventory list to see how much is available at the current queues of price and liquidity since the ASK is the only place from which I can acquire a LONG. In other words, to go long, I have to go to the ASK side to buy a LONG and to go short, I have to go to the BID side to buy a short. As a result, the DOM, for me, is an inventory list of what's available where liquidity is equivalent to the size available at the associated price level.
This, in a way, provides a number of very very nice things to know. One, being the correct side to be on, and the second being the exact level at which slippage will begin. Both items above are known immediately when you look at the DOM. Since you have looked at the DOM for a long time, you will perhaps understand alot of what I said, and or at least, consider how I view things. This is not a right/wrong type of post as most trollers in this forum do. It's a take a look at the structures in the neighborhood type of thing.
Naturally, the question always becomes why or how can an immediate direction be resolved. This is not rocket science however, alot of people fail to put a boundry around what is "immediate" and what is the "context" for that which is immediate. What you have done is interesting at the very least.
My ABSOLUTE for the DOM is that one side of the inventory list ALWAYS runs out first. The point at which this happens, there is a brand new inside inventory list so to speak of. Although it is always there, data providers have not realized this fact and all it's potential, otherwise, they would have already provided a more appropriate DOM layout. What is so potent about this action is that any and all volatility is entirely composed of this ALWAYS CONTINUING event.
Rather than drudge on, as most consider me to do, I will note some specifics for you to consider since you will notably understand how to program this and then find a way to add this knowledge and understanding to your toolbox. Find a way to plot the BID and ASK prices for every single tick using an appropriately sized windows of say 100-150 ticks. Then plot each tick's corresponding BIDSIZE and ASKSIZE along side each tick mark. As you scroll along the chart, note the diminishing levels of the BIDSIZE and ASKSIZE and then note specifically how this relates to the BID/ASK price. Plot BIDSIZE/ASKSIZE in this mannyer also takes care of all the fake size. They stick out like night and day.... Furthurmore, it's tougher for them because the fake stuff just winds up screwing themself.
Kind Regards,
MAK
