The DOM, for depth of market, is the order book displayed vertically: at each price level, the quantity resting on the bid on one side and on the ask on the other. It is the only window onto what the market displays an intention to do, as opposed to what it has done.
Resting orders on each side
Contents
The DOM is a vertical price ladder. To the right of each price, the number of contracts sellers are willing to give up at that level; to the left, the number buyers are willing to pay. It is called depth of market because you see not only the best available price, but also what waits behind it.
The appeal is obvious and the trap less so. What the DOM shows has not happened yet. A wall of 500 contracts at a price does not mean 500 contracts will trade there: it means somebody is displaying that quantity right now, and can pull it before price arrives.
It is a tool for markets with a central book, so mainly futures, where every order goes through the same clearing house. In Forex there is no single book and each broker displays its own, which describes its own flow rather than the market. Our lesson on order flow puts the tool back in context.
DOM = for each price, the quantity resting on the bid and on the ask, at instant t
The spread is the gap between the best bid and the best ask. It is the line where the two columns meet.
The displayed depth is truncated by the platform, often at ten levels each side. What lies beyond exists and is not shown.
The DOM has no memory. It describes an instant, and it has already changed by the time you finish reading it. It is the only tool in this family whose value evaporates within a second.
| What you see in the book | What it means, and does not mean |
|---|---|
| A large quantity at one price | Somebody is displaying an intention. It does not say it will be honoured. |
| That quantity vanishes as price approaches | A very frequent case. The order was displayed with no intention of executing. |
| It is absorbed without price moving | Here something real happened: transactions took place. |
| The book empties on both sides | Nobody is willing to quote. Prices turn erratic, often before an announcement. |
| The spread widens | The cost of entry rises. A correct read is worth nothing if execution erases it. |
The first two rows of the table contain the DOM's entire problem. A large order displayed and a large order pulled look exactly the same until the last second, and the difference between them is the difference between information and a decoy. That is why a book is never read on its own: you need to see what executed to know whether what was displayed mattered.
The practical consequence is that the DOM is an execution tool more than a decision tool. It tells you whether the price you want to enter at is genuinely available, and at what cost, once the decision to enter was made elsewhere. Mistaking it for an analysis tool is the fastest way to lose money with it.
This is the sturdiest use, and the least spectacular. Before sending a market order, the book says how many contracts are available at the best price and what level you drop to if your size exceeds it. For a large position, that is the difference between the hoped-for price and the price obtained.
It is also the only use that does not depend on the sincerity of displayed orders: the question is not what others intend to do, but what is available right now.
A book thinning out on both sides is an execution signal, not an analysis one: it announces that prices are about to jump, often ahead of a release. It does not say in which direction, and that is not what it is for.
Knowing liquidity has gone is reason enough not to enter, or to reduce size. It is a defensive use, and the one that pays most for a trader who is not a professional scalper.
The central flaw is that the DOM shows revocable intentions. An order can be displayed precisely to be seen, then pulled before being hit. That practice has a name, it is banned on regulated markets, and it goes on existing. Reading a book as a fact means reading as true a statement its author can withdraw for free.
The second is that nothing is recorded. The book from thirty seconds ago exists nowhere in an ordinary platform. So you cannot go back and check whether your read was right, which puts the DOM in a category of its own: it is the only tool on this page you cannot build statistics on without specialised kit.
The third concerns Forex, as with the volume profile. There is no central book: what your broker displays is its own, sometimes a reconstruction. Reading it as the depth of the market is a mistake of nature, and all the easier to make since the display looks identical.
The classic mistake. Taking a large displayed order for a barrier. It is the book's most visible information and its least reliable, since it can be pulled for free and without trace. The only thing that matters is whether that order was absorbed, and that is not visible in the DOM, it is visible in what executed.
| Indicator | Formula | What it measures | When to use it |
|---|---|---|---|
| DOM | The order book displayed vertically | RESTING orders, at a given instant | Checking availability before executing |
| Footprint | Each candle opened into two columns | What ACTUALLY executed, level by level | Reading aggression, after the fact |
| Volume profile | Volume sorted by price over a period | Where the market traded most | Placing targets, spotting thin areas |
| Time and sales | The list of transactions, one per line | Every execution, in order | Following the pace of flow live |
This is the use where the book cannot mislead you: what is available now is a fact, even if displayed intentions are not. Looking at the DOM when sending the order, rather than when deciding the trade, puts the tool exactly where it is reliable.
A wall in the book is the most visible and least reliable information there is, since it can be pulled for free. The only thing worth anything is seeing whether that wall is absorbed: there, transactions took place, and it is the footprint that shows it, not the DOM.
Reading the book leads to short and numerous trades, where commission and spread weigh more than the read itself. A style of ten trades a day pays its costs ten times: that is often where the result goes, not into the quality of the analysis.
DOM stands for depth of market. It is the order book displayed vertically: at each price level, the quantity resting on the bid and the quantity resting on the ask, at the present instant.
No. It shows what participants display an intention to do, and those orders can be pulled before executing. That is the essential distinction: the book shows a promise, not a fact, and a promise can be cancelled for free.
A DOM trader takes execution decisions from the order book, almost always on futures and over very short horizons. DOM trading produces many trades, so many costs, and it is most often the cost structure rather than the quality of the read that decides its result.
Not strictly. Forex has no central book: what your broker displays is its own, and sometimes a reconstruction from its liquidity providers. The display looks identical to the futures one, and the information is not of the same nature.
The DOM shows resting orders, so what has not happened yet and can be cancelled. The footprint shows what actually executed, level by level, so transactions that can no longer be undone. That is the whole difference between what is shown and what is done.
Tradoshi does not display an order book, and it will not: a journal records what executed, and the DOM is by nature what has not executed yet. What it brings a book trader lies elsewhere, and it is precisely what that style neglects most.
Every imported trade carries its commission and its swap, and the P&L displayed is net of both. On a style taking ten trades a day, the gap between gross and net is what decides profitability, long before the quality of the read. The Reports screen gives profit factor on that net, and the Cash screen lets you estimate the schedule when a broker returns no commission at all.
To go deeper on this: read the full guide. Every term is gathered in the glossary.