Stocks and Commodities Magazine

Depth of Market in Futures

Should all traders be placing futures orders through a DOM panel? What are the advantages and disadvantages of doing so?

The DOM (depth of market) panel is a platform feature that enables traders to view the “trading book” of a particular futures market while providing quick and efficient order-entry capabilities. The trading book is purely the collective working limit orders of other market participants at various prices surrounding the current market price. Note that stop orders are not included, and market orders are executed immediately so they never become part of the “book.”

The DOM panel has become increasingly popular among daytraders because of the belief that it offers users an “edge” over other market participants due to the visibility of others’ working limit orders. Nonetheless, I argue that since nearly every trader has access to DOM trading capabilities these days, there really isn’t an edge at all. Moreover, savvy traders executing large trading size have developed methods to disguise the true size of their orders through the use of “iceberg orders” (discussed in my June 2013 Futures For You column).

Perhaps the true advantage of using a DOM panel is the ease and quickness at which traders can execute orders. Although each platform will have slightly different logistics and designs, nearly all of them offer one-click order entry; drag & drop order modification; a panic button that exits all positions and cancels any working orders; and strategy orders such as brackets or OCO (one cancels the other) orders.

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