The DOMTracker Oscillator Study
The previous post introduced the DOMTracker, which is part of the Pre-Trade Analytics group included in 7.5. This post details another study called DOMTracker Oscillator. This study is the difference between ask volume line (red) and the bid volume line (green) from the DOMTracker Study.
To review, the bid volume line (green) of the DOMTracker study is the weighted sum of the total amount of bid orders posted below the inside market out to five price levels while the TradeFlow bar is built. The ask volume line (red) of the DOMTracker study is the weighted sum of the total amount of ask orders posted above the inside market out to five price levels while the TradeFlow bar is built. The size of the posted order can increase or decrease while the TradeFlow bar is built. This study displays what traders are doing in the order book away from the inside market.
The example chart is a 3-bar aggregated TradeFlow bars of the E-mini S&P 500 with the DOMTracker Oscillator the middle pane and the DOMTracker study in the bottom pane. Notice how the bid volume line (green) of the DOMTracker study tends to climb when the market is dropping and when the market is climbing the ask volume line (red) of the DOMTracker study ramps up.
I have plotted arrows marking the change in the direction of the DOMTracker Oscillator to the TradeFlow bars (rising to falling and falling to rising readings). The change in the placement of orders by traders in the order book shows some interesting correlations to the change in the direction of the E-mini S&P 500 on a short-term basis.
Both the DOMTracker study and the DOMTracker Oscillator have a set of preferences that traders can modify to test out different ways of measuring traders actions in the order book.