By contrast, the current "winning" side (the bid in this case as we ticked up), will not be moving towards it's strong side where it has a queue of resting orders on the DOM, so it will start the new price level with 0 resting orders. It will have to spontaneously back fill resting volume very quickly to stand a chance in the fight over the next price level and to continue moving higher. Essentially, the market has to "fill" in these levels to support a continued movement higher.
As you can imagine, a fight with all other things being even between one side with 63 contracts and one side with 0 contracts is pretty much a done deal 9 times out of 10. So what happens is this: the market will tick up to this level, a few limit orders will pop into the new ask level, a few transactions might hit both sides, but ultimately the bid side will break and the market will tick back down.
When the market ticks back down, the same thing will occur in that direction but in reverse. The ask side will start with heavy resting volume, but the bid side will have 0 volume.
What you are witnessing is the split second fight between these two adjacent strong sides as they keep beating and flipping their opposing weak sides over and over. With the ES during the US cash session this usually takes 10 price levels (they will flip back and forth with the strong siding always winning). Until eventually one of the two strong sides will break. And the market then moves to the new next inflection point.
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You will hear these terms mentioned a lot during your trading. The term bid and ask (also known as bid and offer) refers to a two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time.
The bid (buy) price represents the maximum price that a buyer is willing to pay for a security.
The ask (sell) price represents the minimum price that a seller is willing to receive.
A trade or transaction occurs after the buyer and seller agree on a price for the security.
The difference between bid and ask prices is known as the spread. This is a key indicator of the liquidity of the asset. In general, the smaller the spread, the better the liquidity and typically the ES instrument has a very small spread.
The SuperDOM (an example of the SuperDOM from Ninjatrader 8 is shown the right) provides complete functionality for the management of orders, positions, and discretionary exit and stop strategies in a highly visual and efficient manner.
The DOM at the end of the word SuperDOM stands for Depth of Market which you can see displayed in the Buy and Sell columns of the NinjaTrader SuperDOM.
The following market depth items can be displayed as per the snapshot to the right.
1. Bid Depth
The Depth of Market (in this case displaying 10 levels of depth) shows the total number of resting orders on the Buy side. These are resting limit orders. The eleventh level is the total of the 10 levels of resting orders, so in this case the total is 1,050.
2. Ask Depth
The Depth of Market (in this case displaying 10 levels of depth) shows the total number of resting orders on the Sell side. These are resting limit orders. The eleventh level is the total of the 10 levels of resting orders, so in this case the total is 1,304.
3. Last Traded Price
The price at which the last trade was executed.
4. Best Bid
The price level of the best bid.
5. Best Offer
The price level of the best offer.
6. Daily High Marker
Daily High and Low values are not calculated by NinjaTrader and are sent from your data provider. Not all data providers provide this information for all instrument types.
Visualising how the market moves and clears levels
Buy limit orders can only be placed at or below the current best bid price. In the SuperDOM example snapshot to the right, the buy orders on the DOM below 3007.75 are currently outside of the transaction level. So they are "resting" limit orders waiting for the market to move towards them.
Sell limit orders can only be placed at or above the current best ask price. In the SuperDOM example snapshot to the right, the ask orders on the DOM above 3007.75 are currently outside of the transaction level. So they are "resting" limit orders waiting for the market to move towards them.
As an example, when a price level clears and the ask (sell) side breaks, all of the 76 orders at 3008.00 get filled (or cancelled) and there will be nothing left for resistence at this price level, so it will break and the market will move up 1 tick to this new price level at 3008.00.
When at this new price level (3008.00) it will start with 2 prices with two corresponding resting volumes.
The new ask price in this example will be 3008.25 and it will start the price level with 63 contracts (assuming this number doesn't change from the snapshot to the right).