Is WOM totally useless?

[superfrank]

WOM will always be useful as the whole market is based on how many people are backing or laying at any time. So anything that gives you a measure on that will be useful. But as with a lot of indicators it depends when you are using it and what you are using it for.

i'm surprised that you defend WoM as a semi-useful indicator, but i bow to your superior knowledge.
personally i fail to see how money that is sat 2 or 3 ticks away from the price point(s) being traded should be considered anything but irrelevant (most of the time), especially with the increased amount of spoofing and manipulation over the last few years.

[freddy]

I would say Wom when something is trending or in a breakout is different than Wom in a stagnant market.

if there is momentum behind it it can be useful .

[malcolmk33]

I would use WoM as a confirmation indicator. First I would form an opinion of where the price is heading (up, down, or flipping), and the subsequent WoM behavior must conform with what I predict, or else I will scratch and re-evaluate. I must add that WoM is only part of the parcel when forming an opinion.

'There is nothing wrong with indicators, just the angle one took to view them.'

[Euler]

I would say Wom when something is trending or in a breakout is different than Wom in a stagnant market.

if there is momentum behind it it can be useful .

I agree

[James1st]

If the WOM crosses the 50% line in advance of an odds movement (and it does happen occasionally) then it is equally likely that that crossover will be in the wrong direction.

Thanks James.

So would it be fair to say that WOM is only useful in certain situations, and in other situations it has no predictive power whatsoever?

Jeff

I think many people do not understand WOM at all (even when they use it ). There are 2 distinct situations arise when a layer/backer/trader/punter comes to the market and in the first instance he/she is more likely to take the odds on offer and a bet is matched that shows itself in the ladder matched amounts. This money will never appear in the WOM but represents most of the money matched in any event.

The second instance is where a layer/backer/trader/punter joins the queue already in the ladder and each of these people have their own varied reasons for doing so. Only in this second instance is the money reflected in the WOM.

The theory goes that money waiting in the queue is genuine and represents real people placing real bets and "should" therefore indicate which direction the odds should move next.. However, as the odds move (and only after it moves), this WOM money moves in such a way as to follow the odds. Quite often the money in the queue (WOM) magically disappears and the only conclusion that one can draw is that the money that was there was never intended for matching. This is what makes the WOM a suspect indicator.

Mistaking WOM as a leading indicator as to what will happen in the market is not something a novice should entertain.

[Euler]

i'm surprised that you defend WoM as a semi-useful indicator, but i bow to your superior knowledge.

It depends how you use it, it's easy to be dismissive of it, but trying to objectively measure it doesn't really lead you to its most effective use either so it's easy to understand why people would see no value it in.

At the end of the day money waiting to be matched and money matched tells you a lot about the market. But there is plenty you can do without looking at it or measuring it exactly.

[Iron]

Quite often the money in the queue (WOM) magically disappears and the only conclusion that one can draw is that the money that was there was never intended for matching. This is what makes the WOM a suspect indicator.

It is not possible that WOM works due to self-fulfilling prophesy?

Also, could it not be that people sometimes offer money a couple of ticks from the action because they are interested in backing or laying, and want to exploit the market's latent volatility to gain a better price than they'd get by just taking the available money?

Jeff

[James1st]

Anything is possible Jeff. But here is an interesting twist...

I am essentially a trend trader and as such don't have time to sit in a queue when opening a bet. However, I almost always have my money sitting in the queue (adding to WOM) waiting to exit. Now if you follow the logic then I am actually altering the future WOM creating an impression that the odds should be moving against me. Think about it.

[Iron]

I am essentially a trend trader and as such don't have time to sit in a queue when opening a bet. However, I almost always have my money sitting in the queue (adding to WOM) waiting to exit.

Why do you offer rather than take when exiting, out of interest?

Now if you follow the logic then I am actually altering the future WOM creating an impression that the odds should be moving against me. Think about it.

Perhaps your presence in the market does affect the market, unless your stake size is such that you fly under the radar.

Jeff

[freddy]

When people are trying to jump on fast moving trends they are still effecting the wom even though they are trying to take the current odds.

there are lots of unmatched bets that are getting canceled and re-submitted and stacking up in the last 3 prices.

[James1st]

Hi Jeff,

Trend traders essentially use a trigger (or series of) to enter a trade and in the most instances that entry is as close to the take off as possible, hence the need to enter the trend usually as it is happening. However, the trade exit is essentially a judgement on where the trend is likely to end or stall. This is normally at a support/resistance level and I always place my exits just before the S/R levels. Of course you can use an MA or a momentum indicator instead but since I am able to call the exit with a very high degree of accuracy, I prefer to simply place the exits as soon as I enter the trade.

[Iron]

Quite often the money in the queue (WOM) magically disappears and the only conclusion that one can draw is that the money that was there was never intended for matching. This is what makes the WOM a suspect indicator.

Hi James

To take an extreme example, let's say that the money three ticks either side of the spread looks as follows:

£50 £50 £50 --- £1000 £1000 £1000

If we assume that people placing bets are as likely to lay as to back, then is it not the case that the three £50s will probably get snapped up before the £3,000 on the other side of the book? And if so, does it not follow that the WOM tells us that the price's next movement is likely to be downward?

Jeff

[Photon]

Hi James

To take an extreme example, let's say that the money three ticks either side of the spread looks as follows:

£50 £50 £50 --- £1000 £1000 £1000

If we assume that people placing bets are as likely to lay as to back, then is it not the case that the three £50s will probably get snapped up before the £3,000 on the other side of the book? And if so, does it not follow that the WOM tells us that the price's next movement is likely to be downward?

Jeff

As long as the amount placed on either sides remaiin unchanged, the price will remain the same. The price will only go downward if these £1,000s started asking for the lower price or put another way when instead of offering they started taking price where £50s are.

WOM formed by money lying around doesn;t mean anything but its the fill rate that determines the direction. WOM is indicative of the direction only when the money placed in the queue is in proportion to the intentions of both backers/layers.

[GMBing]

Hi

In my early days I captured WOM at three second intervals race after race and soon learned that it is a complete red herring.. To be fair layers show thier money in queue and backers attack like sharks so to be fair 1 to 2 min high back support WOM can indicate support but not reliable or long term .The shorter the offset?stop the biggger the margin your up against so I have concluded scalping is an illusion - Longer term trends is you best chance to read the markets

Regards

G

[haichless]

I tend to agree with GMBING.
Suppose you have Mr Big who wants to bet £50 at 2.6, and you have Mr Little who wants to lay £50 at 2.6, in theory they are an ideal match, and exactly what the principal of an exchange is all about. However the time they both are looking to make their bet is 2 mins before the off, and the odds have been driven up to 2.7. Mr Big gets matched and is happy, hes got an extra 0.1 on his bets, Mr Little is still waiting and whilst both would have been willing to contribute to the WOM, only one actually is!!!!!