DOM (Depth Of Market)

This tool is not only gives you a very clear indication of where your position stands, it also allows you to see how many buyers and sellers there are each side of the market.

Let's take a look at the DOM

In short, we can see how many orders are in the market to either buy or sell Japanese Yen.

I will use an analogy at this stage to try and keep things quite simple.

Imagine an army of 100 soldiers. There's no super-heroes amongst them, there's no Spartacus, they're just soldiers, all meat and flesh and all equal.
Now imagine those 100 soldiers confronting 30 identical soldiers on the opposing side.....

It's fair to say that all things being equal, the 100 soldiers 'should' defeat the 30, right?

This works in pretty much the same way.

We can see that on the front line of buyers there are 68 soldiers, who are backed up by 156 archers, who are backed up by 148 cavalry (All inside the green squares)
On the opposing side we can see that sellers have 73 soldiers, backed up by 112 archers, backed up by 106 cavalry.
The totals can be seen at the bottom 651 vs 631.
Since I am snipping these shots in real time as I post it's not a great example of one side overpowering the other, but the very short term consensus would be favouring the sellers slightly because of the front 3 rows. The totals at the bottom are taken from 5 rows.

Whilst I type the price has fallen from the 9.760 as shown to 9.756, so 4 ticks

The dotted line accross 9.775 tells us that this is the days high. there's another out of picture below showing the days low.

We can build our risk to reward strategy within this DOM also which allows us to trade with one click, see exactly where our trailing stop and profit targets will be in advance and allows us to move orders, stops, targets, limits etc very very easily.

Now you have a little information on the basics of how everything works do a little revision on the following topics prior to my next post which will be in a few hours.

MFI MoneyFlowIndex
EMA ExponentialMovingAverage
RSI RelativeStrengthIndex
CCI CommodityChannelIndex
DOM DepthOfMarket

I will come back later and break it all down into components, then next week I can show you how the strategy works in real time.