How to Use DOM Data in Forex Trading？

Therefore, they need tools to help them grip with the market and make profitable trades.

Depth of Market (DOM) is a window that displays the real-time market activity at different price levels in a security or currency market. It's a great tool to see where the supply and demand levels are. In this article, we will show you the definition and specific usage of DOM data in forex trading and give you a list of best brokers that offer DOM.

What Is DOM？

Market complexity is the ability of the market to maintain relatively large market orders, without affecting the security price. Market depth takes into account the overall level and scope of open orders, which usually refers to individual security trading.

In forex trading, DOM shows the levels of a particular currency that are being traded at different prices. This allows traders to understand the supply and demand, and therefore liquidity of the currency at each price point.

The larger the volume of buy and sell orders at each price, the greater depth the market is said to have. DOM is often referred to as the order book due to the fact DOM data shows the current pending orders for a currency or security.

Why Does DOM Data Matter？

1. Indicate price trend

DOM data helps traders determine where the price might be headed. Consider a situation where the data reveals that the bid side liquidity exceeds offer side liquidity. This could indicate a bullish trend for the currency pair. Conversely, if offer side liquidity exceed bid side liquidity, it could be a bearish indicator.

2. Scalping

Some traders who use scalping strategies use DOM data to help them determine when they should enter in and out of positions. DOM data is particularly useful to those who scalp as technical indicators and candlestick charts tend to be less reliable over shorter time frames. Very few traders base their short term trading decisions solely on DOM data, and instead use DOM data alongside technical analysis and other trading tools.

3. Large Ticket Traders

In fact, forex traders who take large positions also use depth of market data extensively. This information plays a crucial role as it allows them to see the liquidity at each price level. VWAP (Volume Weighted Average Price) depth of market functionality is particularly useful for those who are placing very large trades as it allows them to see expected entry price instead of the quoted spot price.

What're Pros and Cons of DOM Trading？

DOM displays incoming orders for transactions whose execution will not be affected by non-pricing, shows where the largest volumes are located and helps analyze liquidity imbalances. In other words, it shows the level of an excess of demand over supply and vice versa.

However, for DOM to work, a trader must understand whether he has enough capital and leverage to influence the price so that he can reverse the deal at the changed prices. And it is crucial to keep in mind that since there is no central market in forex, the data presented in the back of the market will be logically limited by the broker who offers the DOM feature.

List of DOM Brokers

The DOM data that you see on your screen does not represent 100% of the trading volume. That's because the forex market is decentralized. As such, market depth determination for the forex market is very different from that in the stock market.

Due to this reason, it's important to find a good intermediary between the investors and the market maker i.e. a broker, which can provide you with extensive details about DOM.

1. Pepperstone

2. XTB

3. Admiral Markets

4. IG

5. Avatrade

6. Forex.com

7. Axi

8. IC Markets

9. RoboForex

10. FxPro

Conclusion

All the information that DOM provides can be useful for determining whether to place an order. DOM data allows traders to understand whether the market is weighted towards buy orders or towards sell orders.

It is recommended to invest time into learning how DOM works as this can provide traders with indications about market conditions. However, traders need to bear in mind that not all orders get reflected in an order queue. Some traders manage to hide the size so that other traders do not get alerted. Nonetheless, a study of DOM can help spot support and resistance levels along with other useful information related to the market.