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I'm just curious if there's any advantage or revelation of watching level 2 in a situation like I mentioned in the title. There was a dollar positive numbers released this AM and eurusd along with other dollar antipodeans barely reacted.
On the Top of Market I could see the larger buys, but I'm wondering if level 2 can reveal anything or at least prove any help in revealing anything remarkable given the situation. Today IS a Friday and liquidity is always inconsistent etc...
I'm not expecting a magical utility.
**I know moves from news can be fickle sometimes, but this question has more to do with level 2
Can you help answer these questions from other members on NexusFi?
Its definitely an interesting question. I have been trying to find an edge in level II DOM for years and have watched many reactions to news and I would say the answer to your question is probably not. The limit orders in level 2 probably won't tell you "why" the euro did something after news. Occasionally you will see some big orders in level 2 right after the news but a volatile market (and a large market like the euro) usually won't be affected by large orders.
A couple minutes after the news, liquidity/limit orders return in most cases. Before news however, the order book usually gets very thin and usually a market order to enter/exit a trade can result in very poor fills. I usually try to get flat before news because its quite the gamble as the market could shoot in either direction quite violently, but that is another subject.
I'll agree and disagree with what has been said.... I use the Jigsaw DOM watching ES & NQ around London Open time... (I never watch RTH)
I do not watch Bids & Ask orders.. I try to remove them from sight. I believe orders can be added and subtracted by machines faster than you can get a message from eye to brain... I'm sure others can make sense of limit orders, and I respect that...
I watch the real trades that have actually happened... the size of the trades, the speed of the trades, is it suddenly getting faster, how quickly are new trades happening, are larger trades moving the price. Range of movement up and down. Making a judgement who is in control. I do find it good at showing when in a move, is it continuing, or something has changed. If it changes, be aware.. In this situation, I mainly watch the price.. Up 2 ticks, down 1, etc etc until Up 2 ticks, down 5..... something has changed...
I don't try to work out movement after news. Its useful to know certain releases may move price, but never which direction it will go. And the market tends to focus on different aspects at different times. Sometimes this bit of data makes price move, other times theres barely any movement...
I decide which way I want to trade from my charts and footprint, the info from the DOM is very much the final decider. Is it going... Are people getting interested in my direction... etc etc
