Stocks & Commodities V. 27:12 (54): Q&A by Don Bright

Q&A by Don Bright

MYSTERIOUS NUMBERS

I started using a prominent retail brokerage firm a few months ago and using their depth of market (Dom) to place trades. On the Dom, when a bid or offer is lifted, it displays for example “1 @ 34.35” or “4 @ 34.32” and such to indicate the 100-share lots at that price. Most of the time, this matches the L2 and the time & sales prints, but often I see “100 @” or “800 @” and there is nothing even close to that kind of size on the L2 or T&S, even if you add a stream of prints together at a given price. Do you know where those numbers come from and why they are not reflected elsewhere? — NoDoji

Hard to say without actually seeing the monitors. However, we teach our traders to monitor the bid size and ask size and watch the numbers change quickly, often with no trades taking place. These numbers change because many automated programs use “if–then” orders. If Xyz trades at 20.40, then place a bid for Abc of 20.10. Cancel if Xyz trades at 20.35. These automated order entries and cancels make the bid-ask size bounce around like crazy.