Depth of Market: a Tool That Makes the Invisible Visible
Everyone is familiar with the rhetorical question about the glass, which is either half-full, or empty. In our case it will be an instrument Depth of Market (abbreviated DOM), which is something visually resembling glass, it allows the trader to see how it is filled with requests and quotes. This tool is integrated into MT4 and MT5 platform and at the same time, as shown by a survey of traders, many of them not only do not use this feature today, but also do not understand why it is generally necessary.
In the classical understanding, Depth of Market is an order book for the purchase and sale of securities on the stock market. Each application includes a price (quote) and the number of shares. The Exchange sends this information to brokers (sales representatives), and they pass it to traders (bidders).
Indeed, all this is true. And the appearance of DOM on MT5 has been aimed to open the door for traders to a full-fledged stock exchange trading. As one of them cried out in social networks: “Colleagues, it is time to grow out of short pants and begin trading as it is done on Wall Street!”
Indeed, it is time. And really, everyone would like to. Still it is not that easy.
And precisely in order to provide traders with access to exchange instruments, DOM originally appeared in MT5 terminals. It is very easy to call it - just click the right mouse button on the chart, and the screen immediately shows information about the volume of orders for the purchase or sale of an instrument by the best and closest to them prices. We emphasize we are talking about exchange-traded instruments. As for the OTC market, which is the Forex, we will talk about it below.
The stock and commodity markets have many strategies that are based on trade with the help of Depth of Market, which allows you to visually assess the supply and demand at a given time. Simply put, the DOM is a window of outstanding orders closest to the market.
It would seem that this is the Holy Grail, which allows you to quickly identify not only possible trends, but also the support and resistance lines; and understand, at what price at this or that given moment one can buy or sell, for example, a particular stake.
However, it is not that simple. Trading robots, as well as market makers often do not stop the desire to mislead the competitors, and therefore put large applications to buy or sell into the Depth of Market, and then… remove them. So trading with its help is not so simple in the modern conditions, as it may seem. Nevertheless, the fact remains - MT5 gives traders quite an effective tool for exchange trading, be it Dubai DGCX, Brazil’s BOVESPA, Istanbul BIST - Borsa Istanbul or Moscow Exchange in Russia. And in order to start operations there, it is sufficient to just select an appropriate broker.
As for the Forex, the picture is quite different. There are frequent reviews of traders who claim that the DOM is not needed at all. I will not agree to this. It is a great tool for scalpers - as it has momentary speed of execution of orders for purchase/sale, as well as the issuing and transfer of orders. Testing on real accounts, at a wide variety of brokers, has shown its efficiency.
The only thing, we must remember that, in spite of the automatic summation and averaging of open positions in trading on MT5, averaging the values of the take-profit and stop-loss does not occur there. Therefore, you have to make corrections manually. But with regard to the MT4 (and now the Depth Of Market is available on this platform), there is no such problem - the symphony of high-speed trading and scalping sounds on “the four” like clockwork, which greatly increases the effectiveness of this action.
Summing up this material, we will ask once again: is our “glass” half empty or half full? It all depends on who needs what. However, the above demonstrates that it is able to quench the thirst for information of many of those who need it so badly.
