Understanding the nuances of market behavior is crucial for anyone who decides to engage in trading. One of the key concepts that traders need to internalize is Market Depth (DOM), which provides a clearer picture of market activity beyond just price movements. Next, let’s figure out what DOM is and how you can use this tool to earn money with a DotBig broker.
What is Market Depth (DOM)?
DOM is a trading tool that displays the current market features for a specific asset. It contains a list of all purchase and sale orders, prices, and volumes. The market depth indicator is the order book or level data.
At the moment, two DOM types are existing there. These are the cost ladder and the order flow. The first is a visual representation of purchase and sale orders, with prices on the left and volumes on the right. The order flow is a more detailed representation of the depth of the market, which shows individual orders as they appear.
Fundamentals About Market Depth
Market depth is a key concept that helps you understand how financial markets work and make informed investment decisions.
The market can absorb relatively large market orders without significantly affecting the price of a security. As a rule, the more buy and sell orders there are, the greater the depth of the market — provided that these orders are fairly evenly distributed around the current market price of this security.
Besides, DOM is closely related to the liquidity and volume of a security, but it does not mean that each stock with a large trading volume has a good market depth. It can be estimated by looking at the security’s order book, which consists of a list of pending buy or sell orders at various price levels. On any given day, the order imbalance can be large enough to create high volatility, even for stocks with the highest daily volumes.
Moreover, market depth data helps traders determine where the price of a particular security may move. For example, a trader can use market depth data to understand the supply and demand spread for a security.
Securities with a high market depth usually have a large trading volume and are sufficiently liquid, which allows traders to place large orders without significantly affecting the price. Meanwhile, securities with poor depth can fluctuate greatly if the difference between buy or sell orders is enough.
DOM Advantages
The DOM indicator is a crucial tool for traders, as it helps them determine liquidity and market depth. It provides these benefits:
- Clarifying the trading case. DOM allows you to see order volumes at different price levels. It is necessary to understand which price levels are key for market participants. Figuratively speaking, the depth indicator allows you to “look into the future” — after all, some of the orders will become deals.
- The best performance. Market depth analysis helps you plan strategies more accurately and optimize entry/exit points based on information about current support and resistance levels.
- A competitive advantage. DOM information provides more information for making decisions based on the current market situation. The depth of the market gives you a competitive advantage over traders who do not have this information.
The Importance of Analytics
Analytics is your first means of trading. These are the advantages of trading based on deep analysis:
- Market Trend Assessment: Understanding current market trends and making decisions based on accurate data rather than subjective guesses.
- Risk management: A possibility of setting Stop losses and Take profits (extremely important for high volatility situations).
- Forecasting price movements: Technical and fundamental analysis makes it possible to predict price movements in order to develop a tactical plan.
- Choosing the optimal time to enter and exit: the ability to identify key support and resistance levels, as well as the ideal moments to open and close positions.
- Decision support: relying on real data in conditions of market fluctuations and high uncertainty.
If you want to trade thoughtfully, structurally, and most importantly, profitably, your key is to use analytical tools. The DotBig exchange can be an ideal place to master this skill.
About DotBig
DotBig is a universal trading platform offering effective instruments, including Forex, securities, cryptocurrencies, and more, to implement various investment strategies. The broker’s clients can easily open an account and start trading after registration, confirmation of identity, and replenishment of the account.
According to DotBig reviews, this international platform operates according to a transparent tariff policy, charging a commission for inactive accounts and not charging a commission for account replenishment. Replenishment and withdrawal of funds can be carried out in various ways, most of which are free.
Customer support is available 24 hours a day, 7 days a week by phone, email, or via the feedback form on the website, which allows users to receive timely assistance. Thanks to its user-friendly interface and efficient order processing, DotBig’s site provides trading convenience for users of any level.
How Does DotBig Analytics Help to Understand the Current Market Environment
To conduct transactions on exchanges — without high-quality analytics, traders risk losing their capital. And the correct use of DOM tools is the most important condition for achieving positive results.
Every trader should be able to predict price movements, understand market trends, and respond promptly to important events in economic and political fields. The high-quality analytics tools that DotBig Exchange offers to its users will help in this. The platform has many powerful tools to benefit your trading experience.
For the convenience of its clients, DotBig Forex broker has developed several effective analytical tools. Their use significantly increases the effectiveness of trading. They are especially useful for novice traders.
Current DotBig analytic tools to explore the depth of the market are:
- Graphics Tools
In addition to the standard platforms, customers can download user-friendly applications on the DotBig Forex website. They are available in both mobile and PC versions.
All trading platforms are highly functional. There are many different chart and time frame options available to users. The images are clear and easy to scale. Judging by the reviews, there are no complaints about the quality of the charts.
- Trading Indicators
The DotBig investments platform offers about 50 trading indicators. There are both standard mt4/5 and newer designs among them. Users note the high accuracy of the indicators. However, the effectiveness of their application largely depends on the trader’s experience and qualifications. Therefore, experts recommend using at least two different indicators that generate trading signals based on various principles.
- Configuring Tools
Traders can customize charts and trading indicators according to their preferences as a wide range of changeable values and indicators is available here. Note that users have a fairly large DotBig trading leverage of 1:400. However, the use of such methods is associated with increased risk.