Topic 23: SuperDOM (DOM)
Content Type: Text lesson (no video)
Text Content
If you are going to use a ninja trader, but of course you can also use another platform, you can use the DOM. In this chapter I'm going to talk about the SUPERDOM of Ninjatrader.
What Is Depth of Market (DOM)?
Depth of market (DOM) is a measure of the supply and demand for liquid, tradeable assets. It is based on the number of open buy and sell orders for a given asset such as a stock or futures contract. The greater the quantity of those orders, the deeper or more liquid, the market is considered to be. Depth of market data is also known as the order book since it consists of a list of pending orders for a security or currency. The data in the book is used to determine which transactions can be processed.
Understanding DOM
By measuring real-time supply and demand, market depth is used by traders to assess the likely direction of an asset's price. It is also used to gauge the number of shares of the asset that can be bought without causing its price to appreciate.
If a stock is extremely liquid, it has a large number of both buyers and sellers. A buyer can purchase a large block of shares without causing a substantial stock price movement.
However, if a stock is not particularly liquid, it doesn't trade as constantly. Purchasing a block of shares may have a noticeable impact on the stock's price.
Depth of market is typically displayed as an electronic list of outstanding buy and sell orders, organized by price level and updated in real-time to reflect current activity. A matching engine pairs up compatible trades for completion.
How do you use the data from the DOM?
Depth of market (DOM) can help us see where the price might go. Because we can see Real time the orders that have been placed and the orders that have been filled and updated and cancelled. A trader might use market depth data to understand the bid-ask spread along with the current volume.
One of NinjaTrader's powerful order entry features is the SuperDOM, an interactive price ladder which displays market depth. The SuperDOM provides complete functionality for the management of orders, positions, and discretionary exit and stop strategies in a highly visual manner. This efficient order entry interface allows traders to not only submit and modify orders, but also monitor order book data to track changes in bids and offers. The "DOM" in SuperDOM stands for "depth of market," also known as Level II or the order book.
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Key Takeaway for Bot
- DOM shows real-time order book (bids and offers at each price level)
- Can see where large orders are placed = potential support/resistance
- Useful for seeing if price movement will be absorbed or push through
- Level II data shows pending orders — where institutional interest sits