Introduction to cTrader Depth of Market
One of the most distinguishing features of cTrader is the Depth of Market capabilities. the cTrader Depth of Market or DoM is used to measure the liquidity of a particular market. What the DoM shows is the volume of buyers and sellers and aggregated into price levels. Essentially the depth of the order book is the current amount of open Buy and Sell Limit Orders. Traders use this to help them understand how active a market is. DoM can also be used to see if larger orders could be filled by the current book and what the average price could be according to the different tiers.
cTrader isn’t actually an exchange, so don’t expect to see your limit orders reflected inside the DoM. The cTrader Depth of Market ladder comes from the quotes that are streamed from your broker or their liquidity provider. Because brokers use different liquidity provider, the DoM in cTrader will not be the same for every broker.
Why is Depth of Market Useful
Knowing the Depth of Market is a valuable indicator that can be used to support trading decisions. As mentioned already, you can see how active a market is. But that’s not all. There are a few conclusions you can make from the DoM. For example, if the Depth of Market doesn’t change frequently it means that not many people are trading the market. Or, if only the upper and thinner tiers of the ladder are fluctuating it means only small volumes are being traded. If there is more depth on one side than another, it shows a particular sentiment.
If you are looking to place a larger order it can be helpful to know the weight behind the top if the book price. Let’s say you want to place a Buy market order for 2 million EUR/USD, the spread could be really tight and the ask price looks good. But if there is only 250 thousand EUR/USD available to buy at that great price and the rest will be filled at much worst prices, it would be ideal to know that in advance and take it into account. With cTrader, you can. Depth of Market helps you to forecast larger orders that will get swept across the book according to VWAP.
Types of cTrader Depth of Market
There are three types of Depth of Market in cTrader and you can easily switch between them. The Standard DoM is a view only indicator that shows different tiers. Each tier is a specific price and the aggregated volume available at that price. This is the default type of DoM and it’s just an indicator. The other two discussed below are features that you can trade with. In the DoM panel in cTrader, there are three tabs which allow you to toggle between the types of DoM.
Learn More about cTrader Depth of Market
In future articles, we will explore the cTrader Price DoM and how it’s ideal for scalpers and the Volume Weighted Average Price DoM and how that’s helpful for high volume traders. If you are keen to learn more about forex trading, check our glossary which is full of helpful descriptions.