Hello
I have seen many times in Market Depth values, that even though Buyers are more than Sellers, still stock goes down and vice-versa. Can we use market depth info for trending directions ?
Pls share the exact use of Market depth information.
Thanks.
hElLO tRaDeR,
The process of analyzing market depth through bid / asks table traditionally was known as tape reading.
Nowadays, tape reading process by itself is not a reliable trading strategy.
You can instead use it as a final check point for deciding on your trade entry point and size.
The top 5 levels of bid and asks seen on your retail trading terminal has no sufficient data for making an informed trade decison.
To fully make use of this process, you need to have access to level 3 data of NSE realtime data which gives you upto 20 levels of bid and asks.
Moreover,
1) When a large order is placed with a disclosed quantity condition, the order size is not reflected on the market depth table.
2) With plenty of automated algorithm, this table mostly represents dummy orders that are modified or canceled just a microsecond before they are about to get executed, thereby trapping the retail traders to buy at high and sell at low.
Is their any way to identify the dummy orders on top 5-bids in market depth?
Let say there are 4 buy orders each with 4000 shares and if it goes through then we should see a big green candle at that time.
If we do not see, then can we assumed that those orders were dummy?
What I mean to say that the top 5 bids and asks should have similarity with volume chart.
Thanks,
Pranjal
In my Opinion . Time and energy wasted by retail traders on trying to decode the 5 level order book for daytrading is not worth it.
When a retail trader looks at their little order book with 5 levels, algorithms competing against you are betting their odds with 20 levels.
Does the retail traders stand a chance trying to trade on tape reading these days ?
I believe tape reading is the fundamental basics of intraday trading which identifies order imbalance even though the imbalance may be created by algo trading software. From my experience I always see a breakout whenever there are order imbalance.
People loose money in intraday if they rely on only candle stick chart and other indicators. Break out will not sustain long enough if there are no momentum which is driven by order imbalance.
Where do we get the level 3 info? Also, how do we get market info about large block deals (stock specific)?
I am also oftentimes surprised by the depth of the market, sometimes it seems that you have everything under control, but still that’s by far not always the case. Although of course one’s trading for the most part depends mainly on oneself.
Level 3 info is available only for a fee from the exchance. For NSE, this is
The annual subscription fee of Rs.4,00,000/- each for Capital Market and Futures & Options segment.