Depth of Market Trading Setups: The Latest in Futures Trading Tools by Guy Bower

Author:Guy Bower [Bower, Guy]
Language: eng
Format: epub
Publisher: TradingCourses.com
Published: 2015-06-20T20:00:00+00:00

These three points make it quite difficult to enter the market in the direction of the move, particularly if you are setting limit orders. The fact is, sometimes you’ll be able to get set at a price, other time you’ll miss it. It’s just a part of trading.

Chapter 7: The Magnet

OK, here is an interesting little pattern. Like all patterns, sometimes it works, other times it doesn’t. However it can set you up with a good risk:reward trade worth a few ticks.

The pattern has to do with larger than normal bids or offers. Essentially these can act like magnets as the market is pushed towards the level just to see what happens.

What will often happen with a level like this is the market will not only gravitate towards that level and test it, it will break that level by a couple of ticks. If the offers are thin enough just below this price, traders will push the market there just to see if once that offer disappears, more buying will come into the market, taking the market higher still.

Now the trade to make if you see this one unfolding will be to buy a few ticks below the level, anticipating a small break above. As soon as you get set on the buy side, get your offers in there for an exit.

In the example below, we had 300 lots sitting on offer at 4331. The chart below shows the market hovering around the high 20’s. At this point, those watching depth knew of the big order sitting at 4331. On a chart you could not see it, but it was there in the depth display.

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