Depth of Market (DOM), also known as the order book, is a powerful tool that provides traders with real-time insights into market liquidity, supply, and demand. This guide explores how DOM works, its key features, and practical strategies for integrating it into your trading approach.
What Is Depth of Market?
Depth of Market (DOM) displays all active buy and sell orders for an asset at various price levels, acting as a dynamic "order book." It helps traders gauge:
- Market liquidity: Higher order volumes indicate greater liquidity.
- Supply/demand imbalances: Identifies support/resistance levels.
- Price action context: Reveals hidden buying/selling pressure beyond the current price.
👉 Master trading strategies with DOM
How the DOM Works
DOM organizes data in two columns:
- Bids (Buy orders): Listed on the left, ranked from highest to lowest price.
- Asks (Sell orders): Listed on the right, ranked from lowest to highest price.
Example: If Asset X trades at $1, DOM shows pending orders at $0.90 (support) and $1.10 (resistance).
Getting Started with DOM
Step-by-Step Setup
- Connect to a Tier 2 Data Broker: Ensure your platform supports Level 2 market data.
- Navigate to the DOM Tab: Found in the trading panel under "Order Book."
- Select Your Asset: DOM data populates for the chosen symbol.
Note: No data? Check if your broker supports the asset.
Key DOM Features
| Element | Description |
|---|---|
| [1] Placed Orders | Your active limit/stop orders. |
| [2] Asks | Aggregate sell orders (resistance levels). |
| [3] Bids | Aggregate buy orders (support levels). |
| [4] Order Cells | Click to place limit orders; Ctrl+Click for stop orders. |
| [5] Cancel Buttons | Remove all limit/stop orders for the asset. |
Placing and Managing Orders
Order Types
- Market Orders: Execute instantly at current prices (
Buy Mkt/Sell Mkt). - Limit Orders: Set custom entry prices (click cells in DOM).
- Stop Orders: Trigger trades when prices hit thresholds (Ctrl+Click).
Modifying Orders
- Drag orders to new price levels or click to edit parameters.
Tracking Positions
- Long Positions: Blue field (bullish view).
- Short Positions: Red field (bearish view).
- Actions: Use
Flattento exit orReverseto switch positions.
FAQs
1. How reliable is DOM data?
DOM reflects real-time broker data but may slightly differ from chart data due to separate feeds.
2. Can DOM predict price movements?
While it shows liquidity, DOM doesn’t guarantee direction—combine with technical analysis.
3. Why are some orders colored?
- Green: Active limit orders.
- Red: Active stop orders.
- Yellow: Stop-limit orders.
4. How do I cancel all orders?
Click CXL ALL at the DOM’s bottom.
Advanced Tips
- Centering: Click the centering button [6] to align DOM with the current price.
- Volume Analysis: Large orders at a price level signal strong support/resistance.
Conclusion
DOM equips traders with a transparent view of market mechanics, enhancing decision-making. By mastering order placement, position tracking, and liquidity analysis, you can leverage DOM to refine your trading edge.
Pro Tip: Practice DOM interpretation in a demo account before live trading.
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