On May 13, 2019, stock index futures had the largest down day of 2019. Several of our top strategies including Cobra III E-mini Nasdaq did well shorting the market. The Market Depth Count Indicators were bearish most of the day. The Market Depth Difference and Market Depth Cumulative revealed the downtrend in the order book throughout the day as the market kept hitting the bid.
The insight of the day is to watch the trend of the day with the Market Depth Cumulative Indicator while looking for divergences in the Market Depth Count Indicator. We saw two short signals using this method towards the end of the day. The goal of this methodology is to find turning points so that we can use “tighter stop losses” with the goal of reducing risk.
We prefer to use these indicators on markets with a liquid order book such as the E-mini S&P.