DOM scalping: concept, definition, functions, platforms, basic principle of work and tasks

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

For trading in financial markets, traders use different methods. Each day of a speculator begins with an analytical forecast of quotes. This allows you to identify the direction of movement of market prices in order to further use them to open positions.

Depending on the situation in the financial market and its participants, the trader uses a suitable strategy to work.

All transactions are divided into three types:

1. Scalping or short positions.
2. Trades in the medium time range.
3. Long-term positions.

The fastest profit on Forex can be obtained if you use transactions with a small time interval in trading.

What is scalping?

In trading, traders use pipsing to get a quick profit with a small profitability. Scalping or, as it is also called, pipsing is a slang term. They aredenote fast earning points in a short time. Strategies developed on their basis always bring the speculator a small profit on each transaction, however, in total terms, he gets a good profit.

Pips are always used by traders for intraday trading. In one day, professionals open several hundred positions. On the stock, currency and commodity markets, a special tool is used to work with short-term transactions - an exchange glass, which displays the volumes of open and future positions. It also contains the values of market quotes and the number of lots for each level.

DOM scalping in financial markets is a fairly common trading method and allows speculators to consistently earn a small number of pips.

Features of Scalping Trading Strategies for the Depth of Market

Short-term deals have their own characteristics. DOM scalping uses special technical indicators that show the volume of market positions at each quote level. Based on these indicators, traders decide to open an order.

All scalping strategies have the following features:

1. Small time range for each trade.
2. Small return, usually a few pips.
3. A large number of orders in one trading day.

To earn more profit, a trader has to make a large number of speculativeoperations.

Benefits of short-term trading

Forex scalping is popular among traders. Of course, first of all, you need to learn how to use it correctly, choose a strategy and work it out.

Scalping Benefits:

1. Stable and high earnings.
2. Short-term trades.
3. Quick profit.
4. Fundamental analytics is not required to open positions.

Beginners, using DOM scalping, make several dozen trading operations per day. As a result, although there are small profits on each trade, in total they often overlap the income from long-term trades.

In addition, scalping attracts most traders with the opportunity to make quick money. Not every speculator, especially a beginner, wants to wait for a profit for months. They are much more interested in earning income quickly and daily.

The big advantage of scalping strategies is that you don't need to use fundamental analysis of market movement in trading and you can use only graphical and technical methods. For DOM scalping strategies, it doesn’t matter where the market will go in a few months, the main thing is to understand its direction for the next few minutes. Therefore, all traders using this method use only technical analysis and graphical constructions in trading.

Disadvantages of DOM scalping

In addition to positive characteristics, pipsing, like anyanother trading technique, has negative points.

Disadvantages of short-term trades:

1. Frequent losses.
2. Mistaken open positions.
3. There is no way to apply the analytical forecast with greater accuracy.
4. Great psycho-emotional and physical stress.

Pros advise beginners to take mandatory breaks after every hour of work. This will help relieve eye strain and increase alertness and observation. Due to constant emotional and psychological stress, a trader quickly gets tired and starts making mistakes.

Frequent losses and incorrectly opened positions occur due to the fact that the speculator cannot always correctly predict the change in quotes. The financial market is constantly in motion, and the smaller the timeframe, the more difficult it is to analyze it. Market noise and interference give false signals, which make the forecast incorrect.

As a result of the combination of all factors, the trader receives losses on transactions. The more experience he has, the more stable and profitable his speculative operations.

What is a glass of stock?

A wide variety of tools are used to work on financial markets. Market glass is a list presented in the form of a table, which displays limit orders from all market participants. In other words, this is a special tool for trading, where buy or sell orders are visible.

Special tradingstrategies. Additionally, technical indicators showing vertical volumes can be applied to it. DOM scalping using specialized tools as filters for false signals almost always brings a trader a stable profit.

Analysis of quotes by the order book

Using this tool, you can track the mood and state of the market, that is, who is more on it: buyers or sellers. The orders of the players are displayed in the “glass”, which allows the trader to explore it. The analysis of the "glass" in scalping is a very important parameter, which determines whether the speculator will be able to earn, as well as the amount of profit.

In trading, it is used to analyze the statistics of placed and closed deals, to determine the rates of large players, the size of the spread and other important characteristics, on the basis of which decisions are made to open positions. All orders are divided into 3 groups, on the basis of which quotes are predicted.

DOM analysis:

1. Large orders from 5k contracts, they need to be monitored most carefully, as these are very significant positions.
2. Average indicators - within 500 contracts, have less impact on the change in quotes.
3. Small orders - no more than 50 contracts.

During the analysis, the trader considers the relationship between active and passive orders. Large players that change the direction of quotes with large volumes of contracts putaggressive claims. Periodically in the market, with the help of passive orders, support and resistance levels are formed.

During strong impulses and trends, the market price breaks through them and leads quotes in the direction it needs. In a calm market in the consolidation zone, there is a rebound from the levels. These parameters are taken into account by traders when predicting changes in quotes and further direction of market movement.

Trading strategy description

For opening short-term trades, beginners are trained in DOM scalping if they are going to use this technique. It begins with the study of the patterns of the financial market, its fundamentals, forecasting and selection of trading tools. After obtaining the necessary knowledge and learning the correct use of the order book, you can choose a trading strategy and pre-test it until stable positive results are achieved.

Description of the trend trading strategy for scalping using the "DOM":

1. Mark the levels of "support" and "resistance" on the chart. The lines are drawn along the tops and bottoms of the candles, in the places of their greatest accumulation. The strategy can be used when there are strong impulses or trends in the market.
2. Now you need to wait until the market quotes touch the sloping (trend) line at its third point and you can open a position in the direction of the impulse.
3. Protective "stop loss" order must be placed outside the trend line.

Required condition: the chart window must simultaneously display the Depth of Market instrument, where orders will be visible, and movements of market quotes.

Scalping platforms

To work in the short-term market, traders use special programs called trading floors or platforms. The most popular among speculators are MetaTrader 5 and Quik. They are different from each other and have their own characteristics.

The MetaTrader 5 trading platform is an updated and improved version of the MetaTrader 4 platform. At the moment, most traders prefer to trade on it. On the one hand, its functionality resembles the previous version, however, MetaTrader 5 also has innovations, such as the Depth of Market tool, which MetaTrader 4 did not have before.

During the trend hunting, DOM scalping according to statistical data allows you to earn more profit compared to other trading strategies. On this platform, the order book can be found in the Market Watch section. Next, you need to go to the "Tools" tab and select "Depth of Market". As additional settings, you can set "One-Click Trading".

Scalping by order book in Quik - platform setup:

• open the "Settings" tab;
• then "Basic";
• further "Trading" and "Orders", uncheck request confirmations;
• "Parameters" - "Settings" - "Advanced", check the box for the visibility of orders and transactions byhim;
• in the "Edit table" section, check the box to show the toolbar, quick entry and rejection of applications.

Trader reviews

On forums and specialized resources you can find the most controversial opinions from both beginners and experts. Mostly about scalping on the "glass" feedback from traders is positive. Many of them believe that it is not just a useful tool, but a necessary and significant element for profitable and complete trading. Professionals advise using the "glass" in trading only after mandatory testing, obtaining positive results and consolidating them in practice.

The negative aspects of all traders, without exception, include high voltage and fatigue during scalping trading.