Strategy for trading using Market depth in futures market (not level 2) -Suggestions?

[babymush]

Anyone have any strategies or systems or articles to read up on scalping or short term trading using Market depth?

Not level 2

 

[Strategic Trader]

all strategies use market depth to some extent

 

[Creech]

Good book to read is The Master Swing Trader by Farley. But make sure you know the basics of TA before you even start thinking of reading this book.

 

[babymush]

Thanks anyone have any other books to read on Market Depth?

 

[babymush]

Anyone?

 

[JumpOff]

I saw this book recommended on another board to the same question about trading using market depth info:
Stock Market Logic
by Norman G. Fosback

You can get one used at amazon for about 50 cents.

I don't know anything about it, just passing on what I read elsewhere.
JO

 

[babymush]

Thank you will try to get that book

 

[Glenn]

Delving a little deeper, what do you expect to find out from market depth ?
If you are dealing with an electronic exchange, with no market makers or pit traders, then what does the market depth tell you ?
I'm no expert in it, but it seems to me that the queue of orders on an electronic exchange is a queue of Limit Orders at places where people are prepared to buy or sell if the price ever gets there.
There cannot be a queue of orders at the market price because these will get filled straight away most of the time.
So what use is the market depth ?

I trade futures successfully without market depth.
Glenn

 

[Strategic Trader]

there is a queue at the market price waiting to fill the market orders - and if your size was greater than that at the market price - you would want to check the near levels to evaluate the potentail slippage - bearing in mind that size at each level is changing by the millisecond!

 

[johncona]

Without getting into the terminology ("depth" has a formal and informal definition), there are plenty of papers and math models about market micro structure that seeks to determine whether market depth contributes to future filled price - see e.g. http://www.personal.psu.edu/qxc2/research/JofFuturesMarkets2.pdf, but there are a million of them if you search for "limit order book" or some such on Google. What I see are mostly academic...

 

[SFL Trader]

Thanks anyone have any other books to read on Market Depth?

Yeah. You can read mine. All it talks about, for the most part, is market depth and understanding how to read the order book. Contrary to what some others may post, there is plenty of information in the bids and offers on the screen. Plenty. And I am talking about futures. I use TT's X Trader.

There is no "system". Reading market depth correctly is a skill that has to be acquired by spending a lot of time looking at your screen. The reason a lot of traders give up on it is because all they see are a lot of blinking numbers.

What's important to understand is...the psychology of the actual traders who are causing those numbers to show up in the first place.

It goes bid. It goes offer. It goes bid. It goes offer. Why is that guy buying here? Why is that guy selling here? If those 2,000 contracts trade at 15, is it likely that a bunch of people are going to sell the 14s and 13s? If I think that's the case, then I go short and wait and see if I"m right.

You want to pick spots where you think...I emphasize "think"...new money will be entering the market and scared money will be exiting the market at the same time. This is what causes sharp moves.

I say "think" because the reality is nobody ever knows for certain...unless he is a huge trader who is going to move the market with his order...and even then...it's possible that another huge trader will step up and take the other side. We are all out there making educated guesses based on previous experience.

The ball may have fallen on "black" 20 times and it might appear as though you've found easy money...but "red" is always just one spin away.

 

[aversano]

I sure hope that you aren't using any technical analysis....

Delving a little deeper, what do you expect to find out from market depth ?
If you are dealing with an electronic exchange, with no market makers or pit traders, then what does the market depth tell you ?
I'm no expert in it, but it seems to me that the queue of orders on an electronic exchange is a queue of Limit Orders at places where people are prepared to buy or sell if the price ever gets there.
There cannot be a queue of orders at the market price because these will get filled straight away most of the time.
So what use is the market depth ?

I trade futures successfully without market depth.
Glenn

 

[aversano]

Yeah. You can read mine. All it talks about, for the most part, is market depth and understanding how to read the order book. Contrary to what some others may post, there is plenty of information in the bids and offers on the screen. Plenty. And I am talking about futures. I use TT's X Trader.

There is no "system". Reading market depth correctly is a skill that has to be acquired by spending a lot of time looking at your screen. The reason a lot of traders give up on it is because all they see are a lot of blinking numbers.

What's important to understand is...the psychology of the actual traders who are causing those numbers to show up in the first place.

It goes bid. It goes offer. It goes bid. It goes offer. Why is that guy buying here? Why is that guy selling here? If those 2,000 contracts trade at 15, is it likely that a bunch of people are going to sell the 14s and 13s? If I think that's the case, then I go short and wait and see if I"m right.

You want to pick spots where you think...I emphasize "think"...new money will be entering the market and scared money will be exiting the market at the same time. This is what causes sharp moves.

I say "think" because the reality is nobody ever knows for certain...unless he is a huge trader who is going to move the market with his order...and even then...it's possible that another huge trader will step up and take the other side. We are all out there making educated guesses based on previous experience.

The ball may have fallen on "black" 20 times and it might appear as though you've found easy money...but "red" is always just one spin away.

Hi, are you still in this business? Trading using market depth?

 

[AMorgan]

I saw this book recommended on another board to the same question about trading using market depth info:
Stock Market Logic
by Norman G. Fosback

You can get one used at amazon for about 50 cents.

I don't know anything about it, just passing on what I read elsewhere.
JO

Quite a good read, Ive been recommended it by another