
{/* banner prompt: Cinematic realistic photograph, 16:9 wide banner composition: a laptop on a wooden desk showing blurred lines of code in a dark editor, beside it a second screen with an abstract heatmap of green and red blocks, a notebook with hand-drawn diagrams, warm desk lamp light at night. Muted teal and warm amber colour grade, soft natural light, shallow depth of field, high detail, photorealistic, no readable text, no numbers, no logos, no visible faces. */}

This is the final post in the order book craft track of the [ASX order book series](/blog/2026/10/12-reading-the-asx-order-book-how-intraday-traders-actually-find-edge/). The previous seven posts described what experienced intraday traders look at: [depth over charts](/blog/2026/10/13-why-the-best-intraday-traders-barely-look-at-charts/), [protection](/blog/2026/10/14-protection-the-liquidity-you-lean-on/), the [opening auction](/blog/2026/10/15-reading-the-asx-opening-auction/), [gap cause](/blog/2026/10/16-why-did-it-gap-mechanical-gaps-vs-information-gaps/), [cross-market leads](/blog/2026/10/17-cross-market-leads-and-the-indicative-open/), [fake and hidden size](/blog/2026/10/18-spoofs-icebergs-and-reloading-orders/) and [time-based exits](/blog/2026/10/19-when-the-tape-stops-confirming-time-stops-and-liquidity-exits/).

All of that is discretionary. A good trader does it by eye in a few seconds. But almost every piece of it can be expressed as a number, and once it's a number we can test whether it actually predicts anything. That's the job of this post.

As I've written before, [an indicator is a measurement, not a decision](/blog/2026/09/13-indicators-measure-strategies-decide-alpha-is-what-survives/). Everything below is measurement. Whether any of it becomes a strategy depends on what the testing says.

<KeyPoints>

- Python features for imbalance, microprice, protection, resistance, wall persistence and auction mispricing.
- Label with short forward horizons and evaluate per event or per day, after costs and latency.
- The likely edge is in narrow event setups, not in a continuous imbalance signal.

</KeyPoints>

## Getting depth data

You need order book snapshots: at a given timestamp, the price and volume at each of the top N levels on each side. For ASX stocks, options include your broker's API if it provides market depth (Interactive Brokers, for example, offers a market depth request, subject to data subscriptions), or a commercial data vendor. Depth data is bulky, so most people capture snapshots at a fixed interval or on every change for a short watchlist.

I'll assume a simple schema:

```python
# one row per snapshot
# ts, code, bid_px_1..N, bid_sz_1..N, ask_px_1..N, ask_sz_1..N
import numpy as np
import pandas as pd

N = 5
BID_PX = [f"bid_px_{i}" for i in range(1, N + 1)]
BID_SZ = [f"bid_sz_{i}" for i in range(1, N + 1)]
ASK_PX = [f"ask_px_{i}" for i in range(1, N + 1)]
ASK_SZ = [f"ask_sz_{i}" for i in range(1, N + 1)]
```

## Feature 1: order book imbalance

The classic measure: how lopsided is the visible depth near the touch?

```python
def imbalance(df: pd.DataFrame, levels: int = 3, decay: float = 0.5) -> pd.Series:
    """Weighted depth imbalance in [-1, 1]. Positive = more bid depth."""
    w = np.array([decay ** i for i in range(levels)])
    bids = df[BID_SZ[:levels]].to_numpy() @ w
    asks = df[ASK_SZ[:levels]].to_numpy() @ w
    return pd.Series((bids - asks) / (bids + asks), index=df.index)
```

The decay weights nearer levels more heavily, because size one tick away matters more than size five ticks away.

## Feature 2: microprice

The midpoint ignores size. The microprice tilts the mid toward the side with *less* depth, because that side is more likely to be consumed next.

```python
def microprice(df: pd.DataFrame) -> pd.Series:
    b, a = df["bid_px_1"], df["ask_px_1"]
    qb, qa = df["bid_sz_1"], df["ask_sz_1"]
    return (b * qa + a * qb) / (qa + qb)
```

Microprice minus mid, expressed in ticks, is a neat one-number summary of top-of-book pressure.

## Feature 3: protection ratio

This is the discretionary idea from the protection post, made explicit: depth behind an entry, relative to how much volume normally trades.

```python
def protection_ratio(df: pd.DataFrame, side: int, recent_vol_per_min: pd.Series,
                     levels: int = 3) -> pd.Series:
    """side=+1 for a long (protection = bids), -1 for a short (protection = asks).
    recent_vol_per_min: rolling average traded volume per minute, aligned to df.
    """
    cols = BID_SZ[:levels] if side == 1 else ASK_SZ[:levels]
    depth = df[cols].sum(axis=1)
    return depth / recent_vol_per_min.replace(0, np.nan)
```

A ratio of 10 means it would take roughly ten minutes of normal trading to consume the protection. A ratio of 0.5 means it could be gone in thirty seconds.

## Feature 4: resistance ahead

The twin of protection: how much stands in the way of the move you want?

```python
def resistance_ratio(df: pd.DataFrame, side: int, levels: int = 3) -> pd.Series:
    """Depth ahead of the trade divided by depth behind it. Lower is better."""
    ahead = df[(ASK_SZ if side == 1 else BID_SZ)[:levels]].sum(axis=1)
    behind = df[(BID_SZ if side == 1 else ASK_SZ)[:levels]].sum(axis=1)
    return ahead / behind.replace(0, np.nan)
```

## Feature 5: wall persistence

To deal with spoofs, measure whether large orders survive. One simple approach: track the maximum single-level size near the touch, and how many consecutive snapshots a level above some size threshold has existed at the same price.

```python
def wall_persistence(df: pd.DataFrame, side: int, threshold: float) -> pd.Series:
    """Consecutive snapshots that a level >= threshold has existed at the same price."""
    px_cols, sz_cols = (BID_PX, BID_SZ) if side == 1 else (ASK_PX, ASK_SZ)
    wall_px = []
    for _, row in df.iterrows():
        big = [row[p] for p, s in zip(px_cols, sz_cols) if row[s] >= threshold]
        wall_px.append(big[0] if big else np.nan)
    wall_px = pd.Series(wall_px, index=df.index)
    same = wall_px.eq(wall_px.shift()) & wall_px.notna()
    return same.groupby((~same).cumsum()).cumsum()
```

A wall that has persisted, and especially one that has persisted while volume traded at its price, is more trustworthy than one that just appeared.

## Feature 6: auction mispricing

At the open, the most useful single feature from the earlier posts is how far the indicative gap deviates from what the overnight lead and sector peers imply.

```python
def auction_mispricing(indicative_gap: pd.Series, lead_move: pd.Series,
                       beta: pd.Series, peer_median_gap: pd.Series,
                       w_lead: float = 0.5) -> pd.Series:
    """Positive = indicated too high versus references (fade candidate)."""
    expected = w_lead * beta * lead_move + (1 - w_lead) * peer_median_gap
    return indicative_gap - expected
```

Combined with the auction surplus sign and a protection ratio from the pre-open book, this is a reasonable first attempt at encoding the "is the open mispriced?" judgement.

## Labelling: what are we predicting?

Features need a target. For scalping-style questions the natural targets are short horizons:

```python
def forward_return_ticks(mid: pd.Series, tick: float, horizon: str) -> pd.Series:
    """Mid-price change over a forward time horizon, in ticks."""
    fwd = mid.shift(freq=f"-{horizon}").reindex(mid.index, method="ffill")
    return (fwd - mid) / tick
```

Use several horizons (5 seconds, 30 seconds, 2 minutes). Different features tend to work at different horizons, and the time-stop post suggests that most of the edge in scalps shows up very early.

## Evaluating without fooling yourself

This is the part people skip. A few rules I apply:

<Table data={
    {
        headers: ['Pitfall', 'Guard'],
        rows: [
            ['Lookahead', 'Only use information available at the snapshot timestamp. Rolling volumes must be trailing.'],
            ['Mid-price fantasy', 'Mid moves are not tradeable. Re-test with entry at the touch you would actually pay.'],
            ['Costs', 'Subtract brokerage and the spread. Many imbalance signals vanish after costs.'],
            ['Latency', 'Add a realistic delay between signal and order. A one second delay changes a lot.'],
            ['Overlapping samples', 'Snapshots seconds apart are not independent. Evaluate per event or per day.'],
            ['Regime', 'Split by period and by market condition. A feature that only worked in one month is noise.'],
            ['Universe', 'Test on stocks you would actually trade, with similar liquidity and tick size.'],
        ]
    }
} />

A simple first evaluation is to bucket a feature into quantiles and look at the average forward return in each bucket, after costs, with confidence intervals computed per day rather than per snapshot.

```python
def bucket_report(feature: pd.Series, fwd: pd.Series, q: int = 5) -> pd.DataFrame:
    df = pd.concat({"f": feature, "y": fwd}, axis=1).dropna()
    df["bucket"] = pd.qcut(df["f"], q, labels=False, duplicates="drop")
    return df.groupby("bucket")["y"].agg(["count", "mean", "std"])
```

If the top and bottom buckets don't separate clearly after costs, the feature isn't useful at that horizon, however intuitive it looked.

## What I expect to find

I'll be honest about priors. Raw top-of-book imbalance is one of the most studied microstructure signals there is, and most of its edge goes to participants who are much faster than any human or retail system. I don't expect it to survive costs on its own.

What I'm more interested in is the *combination* the discretionary traders used, at the specific moments they used it: a mispriced auction, plus protection that is large relative to volume, plus little resistance ahead, plus a fast time stop. That's a narrow, event-driven setup, not a continuous signal, and it's where human depth readers seem to have found their edge. Whether it holds up in data is exactly the kind of question I'll be testing in our own systems.

That wraps up the order book craft track. Next, we move to the business side of trading, starting with the most misunderstood pair of numbers in any trading journal.

<SeriesNav series="asx-order-book" />

<Disclaimer />


49212afc165b75b602da1f5391f84e71862eff13bc3db9741fba959ae94bb105

Python examples for computing order book imbalance, microprice, protection ratio and auction mispricing from market depth snapshots, and how to backtest them.

Turning discretionary depth reading into numbers you can test. Python code for order book imbalance, microprice, a protection ratio, a resistance score and an auction mispricing feature, plus how to label and evaluate them honestly without fooling yourself.

Measuring Order Book Imbalance in Code


{/* banner prompt: Cinematic realistic photograph, 16:9 wide banner composition: a large iceberg floating in calm dark blue polar water, the small white tip above the surface and the huge pale turquoise body clearly visible beneath the water line, overcast soft light, cinematic and calm. Muted teal and warm amber colour grade, soft natural light, shallow depth of field, high detail, photorealistic, no readable text, no numbers, no logos, no visible faces. */}

This is part six of the [ASX order book series](/blog/2026/10/12-reading-the-asx-order-book-how-intraday-traders-actually-find-edge/). So far we've treated the order book as information: [protection](/blog/2026/10/14-protection-the-liquidity-you-lean-on/) behind you, a clear path ahead, a surplus in the [opening auction](/blog/2026/10/15-reading-the-asx-opening-auction/). All of that assumes the orders you see are real.

They aren't always. The journals I read were full of moments where a trader leaned on a wall that vanished, or fought a seller who turned out to be far larger than the visible size. Learning to read *behaviour* rather than displayed size was one of the clearest markers of progress over time.

<KeyPoints>

- Large orders can be fake. Trust a wall only after you have seen it absorb volume.
- A small offer that keeps reloading usually means a much larger seller. Don't scalp long into it.
- When the reloading stops and the level clears, the move that follows is often fast.

</KeyPoints>

## Three ways the book misleads you

<Table data={
    {
        headers: ['Type', 'What you see', 'What is actually there'],
        rows: [
            ['Spoof or layering', 'A big order that looks like protection or resistance', 'An order intended to be cancelled before it trades'],
            ['Iceberg or reloading order', 'A modest order at one price that keeps coming back', 'A much larger participant feeding size in pieces'],
            ['Fragmented liquidity', 'Thin depth on one venue', 'More size on another venue or in a broker algorithm'],
        ]
    }
} />

A quick note on legality. Placing orders you intend to cancel in order to create a false impression of supply or demand is market manipulation, and it's illegal in Australia. That doesn't mean it never happens, especially in small, thin stocks, but it does mean regulators take it seriously. Icebergs and reloading orders, on the other hand, are perfectly legitimate ways for large participants to avoid moving the price against themselves.

## Fake size: how to tell if a wall is real

You can't know the intent behind an order. You can observe how it behaves.

**Does it hold when price arrives?** The single most useful test. A genuine large bid gets hit when sellers come down to it, and the prints show volume trading at that price. A spoof disappears one or two ticks before price reaches it.

**Does it move with price?** Some large orders creep up or down a tick at a time, staying just out of reach. That's an order that wants to influence, not to trade.

**Does it appear at convenient moments?** A huge offer that materialises right when a stock starts to run, and vanishes when the run stalls, is designed to scare buyers off.

**Is it out of proportion?** An order worth many times the stock's typical daily turnover, sitting in a quiet small cap, deserves suspicion.

The practical consequence for protection is simple: **don't trust a wall until you've seen it absorb volume**. A wall that has already been hit and is still there is much more meaningful than one that has never been tested.

## Hidden size: icebergs and reloading orders

The opposite problem is more dangerous for intraday traders. A large seller who needs to move a big line doesn't want to show it, because the moment they do, everyone gets out of the way. So they show a small piece. When it's filled, another small piece appears at the same price. And again. And again.

On the tape, this looks like **far more volume trading at one price than was ever displayed there**. On the depth, it looks like an offer that never quite goes away, no matter how many buyers hit it.

The journals described this in plain language: a seller "reloading the offer" all day. One recurring observation was that such a seller is telling you something important: *someone big wants out at this price*. That's not an environment for a long scalp. The stock can only move up once that seller is finished.

<Table data={
    {
        headers: ['Signal', 'What to watch', 'Likely meaning'],
        rows: [
            ['Volume through a level far exceeds displayed size', 'Time and sales at that price', 'Hidden or reloading order'],
            ['Same offer refreshes immediately after being hit', 'Depth at that price', 'A seller feeding size in pieces'],
            ['Price stalls at the same level for a long time on heavy volume', 'Chart plus tape', 'Large participant absorbing the other side'],
            ['Large offer sits in an otherwise thin book', 'Depth relative to normal', 'Someone wants out and is not hiding it well'],
        ]
    }
} />

## The release: when the big order finishes

Here's where the opportunity is. A reloading seller caps a stock. Every buyer runs into them. Then, at some point, the seller is done. The offer at that price is hit, and **nothing reappears**.

What happens next is often fast. All the demand that was being absorbed suddenly has nothing to absorb it, and price can jump several ticks very quickly. Traders who were watching the level, patiently, can buy the moment the reload stops. Traders who were fighting the seller have often given up by then.

The same works in reverse: a large hidden buyer supporting a stock at a level, and the moment they stop, the floor disappears.

Some traders will even hold a position specifically for this: waiting for a large seller at a round number to finish, expecting the stock to move through the level once they do. That takes patience, and it can take days rather than minutes for a really large line.

## Fragmentation: the book you can't see

Australian equities trade on more than one venue. A meaningful share of volume can trade away from the ASX order book, and broker algorithms can hold size that isn't displayed anywhere. Orders on different venues don't always interact the way you'd intuitively expect, especially around the auctions.

For intraday traders the practical points are:

- Use a **consolidated view** of depth if your platform offers one.
- Remember the **ASX auctions** (open and close) are where the official prices are set, and where depth matters most.
- Treat the visible book as a **sample** of intentions, not the full picture.

## Practical rules

Distilled from the journals, here's how the experienced traders handled a book they couldn't fully trust:

<Steps>

1. **Prefer tested walls.** Lean on liquidity that has already absorbed volume.
2. **Exit on disappearance.** If your protection vanishes, you leave. Don't wait to find out whether it was a spoof.
3. **Respect the reloader.** Don't scalp long into a seller who keeps refreshing. Wait for them to finish.
4. **Trade the release.** When the reload stops and the level is cleared, that's often the cleanest entry of the day.
5. **Watch the tape at the level.** Volume traded at a price tells you more than volume displayed at it.
6. **Be extra sceptical in thin stocks.** That's where manipulation and misleading size are most common.

</Steps>

The next post covers what happens after you're in: how to tell when the tape has stopped confirming your trade, and why the best scalpers exit on time as much as on price.

<SeriesNav series="asx-order-book" />

<Disclaimer />


d7c2afb05f974dedea186a98c7a5b36629919d33875edd6fc85dbce9afcc90e8

How to spot spoofed orders, iceberg orders and reloading sellers in the ASX order book, and how intraday traders trade around them.

The order book is not always honest. Some walls vanish when price gets close, and some of the most important orders are barely visible. How ASX intraday traders distinguish fake size from real size, detect a reloading seller, and trade around the moment a hidden order finishes.

Spoofs, Icebergs and Reloading Orders


{/* banner prompt: Cinematic realistic photograph, 16:9 wide banner composition: an old brass auction bell on a polished wooden desk in the foreground, behind it softly blurred trading monitors showing two opposing stacks of green and red bars converging, a wall clock out of focus showing just before ten in the morning. Muted teal and warm amber colour grade, soft natural light, shallow depth of field, high detail, photorealistic, no readable text, no numbers, no logos, no visible faces. */}

This is part three of the [ASX order book series](/blog/2026/10/12-reading-the-asx-order-book-how-intraday-traders-actually-find-edge/). After [protection](/blog/2026/10/14-protection-the-liquidity-you-lean-on/), the second idea that dominated the intraday journals I read was the opening auction. Traders called it "the match." For some of them it was close to their entire edge: a large share of their profit came from the first seconds to minutes after each stock opened.

There's a good reason for that. The ASX open is the one moment each day where every participant's overnight information, every reaction to news, and every institutional order collides at a single price. It's also the one moment where the exchange shows you, in advance, roughly where that price will be.

<KeyPoints>

- The indicative price, matched volume and surplus tell you where and how the open will clear.
- A bid surplus under a long is protection from the first second. An offer surplus is the opposite.
- The last 30 seconds of pre-open matter most. If the picture turns against you, cancel.

</KeyPoints>

## How the ASX open works

Before the open, the market is in **pre-open**. Orders can be entered, amended and cancelled, but nothing trades. The exchange continuously calculates the price that would maximise the volume traded if the auction ran right now. That price is the **indicative opening price** (often shown as IEP or "indicative" in trading platforms).

At the open, a single price auction runs. All orders that can trade at the auction price trade at that one price. Whatever is left over becomes the opening order book for normal continuous trading.

Historically the ASX has opened stocks in staggered groups, by the first character of the ticker, a couple of minutes apart, with a small random element in the exact time of each group. That staggering mattered to traders because it let them focus on one group at a time and plan their orders per group. Auction arrangements do change, so always check the current ASX operating rules for exact timings rather than relying on a blog post.

Two numbers matter most during pre-open:

<Table data={
    {
        headers: ['Field', 'Meaning', 'Why traders care'],
        rows: [
            ['Indicative price', 'Price at which the auction would clear if it ran now', 'Tells you the gap versus the previous close before anyone can trade'],
            ['Matched volume', 'Shares that would trade at the indicative price', 'How much liquidity the open will actually provide'],
            ['Surplus volume', 'Shares left unmatched at the indicative price, and on which side', 'Which side still has unfilled demand at the open price'],
        ]
    }
} />

## Surplus: the most underrated number on the screen

If the auction would clear at 1.20 and there are more buy orders at 1.20 or above than sell orders at 1.20 or below, the excess is a **bid surplus**. Those buyers didn't get filled in the auction. They are still sitting there, at the opening price, the instant continuous trading starts.

Conversely, an **offer surplus** means unfilled sellers are waiting at the open price.

The traders I read were blunt about this. For a long off the open, they wanted to see a **bid surplus**: unfilled buyers at the opening price, which acts as protection immediately underneath them. A long that opens with an offer surplus is starting life with sellers sitting right on top of it.

<Table data={
    {
        headers: ['Pre-open picture', 'Typical read'],
        rows: [
            ['Gap up, bid surplus, thin offers above', 'Demand exceeds supply even at the higher price. Continuation candidate.'],
            ['Gap up, offer surplus, stacked offers above', 'Sellers waiting at and above the open. Fade candidate.'],
            ['Gap down, offer surplus, no bids below', 'Supply not absorbed even at a lower price. Continuation lower.'],
            ['Gap down, bid surplus, big bids below', 'Buyers absorbing the selling. Bounce candidate.'],
        ]
    }
} />

These are tendencies, not laws. But they're the starting point for nearly every match setup I saw described.

## The last 30 seconds

Pre-open orders are free to cancel, so a lot of what you see early in pre-open is positioning, testing and noise. What matters is the picture **just before the auction runs**.

The journals described a specific pattern repeatedly: a long thesis that looked fine for most of pre-open, then **fresh sellers arriving in the final seconds**, the bid side thinning, or the surplus flipping sides. Experienced traders treated that as decisive. They pulled their order and walked away, regardless of how good the news looked. Beginners hesitated, got filled, and owned the trade at the worst moment.

Things to watch in the last stretch before the auction:

- The **surplus flipping** from bid to offer, or the reverse.
- The **indicative price drifting** away from your planned entry.
- **Large orders appearing late** on the side that would hurt you.
- Large orders **disappearing** from the side that was protecting you.
- The **overnight lead moving** during pre-open: futures or a commodity sliding against your trade.

## Is the open mispriced?

At its core the match trade is a judgement about whether the auction price is too high or too low. The traders used a short list of reference points to decide.

**Versus the overnight lead.** If US markets, futures, a relevant commodity or a stock's foreign listing point one way, does the indicative gap agree? (This gets a full post later in the series.)

**Versus sector peers.** If every gold miner is indicated up 2% and one is indicated up 6% with no news of its own, that one is the outlier.

**Versus the cause of the gap.** A gap driven by genuine news is different from a gap driven by one large seller dumping into the auction. (Also its own post.)

**Versus the book.** Is there protection behind the trade? Is the path ahead clear? Is the matched volume large enough that you can actually get in and out?

## Trading the match versus trading the open

There are two broad ways to act on an auction read.

**Participate in the auction.** Place your order in pre-open so it trades at the opening price. You get the auction price and you're in before continuous trading starts. The risk is that your order itself can move the indicative price in a thin stock, and you can't control your exact fill as the auction price moves around.

**Trade the first seconds after the open.** Wait for the auction, then act on what the opening book looks like. You see the result before committing, but the best part of the move may happen in the first few seconds.

Either way, the common thread in the journals was speed of the exit. A match trade is a bet that the open is mispriced and will correct quickly. Many winning match trades described were measured in seconds: a few ticks, very soon after the open. If the move didn't come, the trade was scratched.

## Common mistakes

These came up again and again, usually in the early months of a journal:

- **Amending orders as the stock opens**, and getting filled at a much worse price than planned.
- **Forgetting an order in pre-open** and getting filled on a stock you'd stopped watching.
- **Shorting without borrow** arranged before the auction.
- **Trying to trade too many auctions at once**, then executing all of them badly.
- **Chasing after missing the match**, buying the stock a few seconds later at a worse price with no protection.
- **Ignoring matched volume**, taking a size that the opening liquidity couldn't absorb.

## A pre-open routine

A compressed version of the routine I saw across the more consistent traders:

<Steps>

1. Before pre-open activity heats up: list the overnight leads (US close, futures, key commodities), and the stocks with fresh price-sensitive news.
2. Choose a handful of candidates. Write the thesis for each in one line: long or short, why, and what would invalidate it.
3. During pre-open: watch the indicative price, matched volume and surplus on those names only.
4. In the final seconds: confirm the book still supports the thesis. If anything has changed against you, cancel.
5. After the open: exit fast if the move doesn't come. Review every match trade later, with the book picture written down.

</Steps>

That's the open. The next post looks at the single most useful question to ask about any gap: *why* did it gap?

<SeriesNav series="asx-order-book" />

<Disclaimer />


341c281af9fc84acf1275f7b09206fbf8bfe152977bc8bb28c87ec31475e1e0e

How the ASX opening auction works, how to read the indicative price and surplus volume in pre-open, and how intraday traders spot a mispriced open.

The ASX open is a single price auction, and for intraday traders it is the most information-dense few minutes of the day. How the pre-open works, what the indicative price and surplus volume tell you, why the last 30 seconds matter, and how traders decide whether the open is mispriced.

Reading the ASX Opening Auction


{/* banner prompt: Cinematic realistic photograph, 16:9 wide banner composition: a rock climber's chalked hand gripping a solid granite hold on a sunlit cliff face, a rope anchor bolted firmly just below, wide view of open sky and the climbing route above, sense of secure footing and clear path upward. Muted teal and warm amber colour grade, soft natural light, shallow depth of field, high detail, photorealistic, no readable text, no numbers, no logos, no visible faces. */}

In the [previous post](/blog/2026/10/13-why-the-best-intraday-traders-barely-look-at-charts/) I argued that profitable intraday traders make decisions from market depth rather than charts. This post is about the specific depth idea that came up more than any other across the journals I read. Different traders used different words for it. The most common one was **protection**.

<KeyPoints>

- Protection is a large resting order behind your entry, with little standing in front of it.
- It only counts if it is large relative to the volume that normally trades through that level.
- Size so you can exit into the protection, and leave the moment it is eaten, pulled or nibbled.

</KeyPoints>

## What protection means

Protection is a large resting order sitting *behind* your entry, on the side that would hurt you.

- If you buy, protection is a large **bid** just below your entry price.
- If you short, protection is a large **offer** just above it.

The logic is simple. If the protective order is genuine, price has to chew through it before your trade goes badly wrong. And if it starts getting eaten or disappears, you have a very clear signal that you were wrong, *before* the loss gets big. Your stop isn't an arbitrary number. It's somebody else's order.

Protection has a twin that matters just as much: **no resistance ahead**. A long with a giant bid behind it is still a poor trade if there's an equally giant offer one tick above. What these traders wanted was a lopsided book: heavy behind, light in front.

## Protection is relative, not absolute

This is the part beginners get wrong, and the part the more experienced journals were most explicit about. A large-looking order is only protection if it's large **relative to how much the stock actually trades**.

Consider two synthetic cases, both with a 250,000 share bid just under the entry.

<Table data={
    {
        headers: ['', 'Stock A', 'Stock B'],
        rows: [
            ['Protective bid size', '250,000', '250,000'],
            ['Typical opening auction volume', '150,000', '3,000,000'],
            ['Average 1-minute volume after the open', '20,000', '400,000'],
            ['Bid as multiple of 1-minute volume', '12.5x', '0.6x'],
            ['Verdict', 'Real protection', 'Decoration'],
        ]
    }
} />

In Stock A, it would take more than twelve minutes of normal trading to chew through that bid. In Stock B, it could be gone in under a minute, and probably before you can react. Same order, completely different meaning.

A simple way to think about it:

```text
protection ratio = protective depth within N ticks / volume expected to trade through that zone
```

What counts as "expected volume" depends on the moment. At the open it's the auction volume and the first minute or two. Mid-session it's the recent per-minute volume. Into the close it's the closing auction. There's no magic threshold, but a ratio well above 1 is a different animal from a ratio below 1.

## Sizing from protection

Protection also tells you how big you can be. Several of the journals sized positions by the liquidity they could exit into, rather than by a fixed dollar amount.

The reasoning: if the protective bid is your exit, you must be able to sell into it without being the one who eats it. If you're long 400,000 shares and the protective bid is 250,000, *you* are the reason it disappears when you try to leave. A rough rule I saw expressed several ways was to keep your size comfortably smaller than the liquidity you're leaning on, so that on a bad day you can get out in one go at roughly the price you planned.

This flips the usual sizing question. Instead of "how much do I want to make?", it's "how much can this book absorb if I'm wrong?"

## Where exactly to enter

If the protective bid is at 0.485, where do you buy? The journals described two approaches.

**Just in front of it.** Join the bid at 0.490, one tick ahead of the big order. You get filled if sellers come down, and you're first in line before the wall. Your risk is a tick or two. The danger is that the wall is fake and gets pulled the moment you're filled.

**On the offer, with the wall well behind.** Pay the offer at 0.500 when the book is clearly lopsided and you expect an immediate move. You pay more but you're in when the move starts. This suits fast situations like the open.

Either way, the risk is defined by the distance to the protection, not by a percentage you picked in advance.

## When protection fails

The exit rule followed directly from the entry logic. Across the journals, the signals to leave were:

<Steps>

1. **The protective order starts getting eaten** and the prints keep coming at it.
2. **It gets pulled**, which may mean it was never real.
3. **It starts being "nibbled"**: small sells keep chipping at it and nobody adds behind it.
4. **New size appears in front of you**: offers stacking above a long, suddenly creating resistance.
5. **Nothing happens.** If the lopsided book doesn't produce a move quickly, the thesis is wrong. (Time stops get a post of their own later in the series.)

</Steps>

What you do *not* do is wait for price to go through the protection and then hope it comes back. That turns a one or two tick loss into the kind of loss these traders spent years learning to avoid.

## The traps

**Spoofed walls.** Some large orders exist to influence other traders and are cancelled before they can be hit. Watch whether a wall holds when price actually reaches it. We'll cover this properly in the post on spoofs and icebergs.

**Crowded protection.** If everybody can see the same wall and everybody is leaning on it, the queue in front of the wall fills up. When it breaks, everyone exits at once into the same thin air.

**Protection without a reason.** A big bid in a stock with no catalyst and no volume is just a resting order in a quiet stock. Protection works best combined with a reason for the stock to move: a stock in play, a mispriced open, a fresh piece of news.

## Turning it into a checklist

Before a scalp entry, the depth-reading version of a pre-trade checklist looks something like this:

<Table data={
    {
        headers: ['Question', 'Good answer'],
        rows: [
            ['Is there a large order behind my entry?', 'Yes, within one to three ticks'],
            ['Is it large relative to expected volume?', 'Several times the expected volume through that zone'],
            ['Is the path ahead clear?', 'Thin depth on the other side, no fresh size arriving'],
            ['Can I exit my full size into the protection?', 'Yes, with room to spare'],
            ['Is there a reason for the stock to move?', 'Catalyst, gap, or mispriced auction'],
            ['What makes me wrong?', 'Protection eaten, pulled, or no move within a short time'],
        ]
    }
} />

If you can't answer the last question in one sentence before you click, you don't have protection. You have hope.

## Why this matters for systematic traders

Protection is one of the most codifiable ideas in discretionary scalping. Depth within N ticks, divided by recent volume, is a number. Whether it's consumed or cancelled is observable. Whether price moves within T seconds after entry is measurable. In the final post of this track we'll sketch how to compute these features from order book snapshots.

<SeriesNav series="asx-order-book" />

<Disclaimer />


1160541f94ed9f578b9c01af30ee2f47269dd5f828e59a159bcd1f668c1e874d

How ASX day traders use large resting bids and offers as protection to define risk, why protection must be measured relative to volume, and when to exit.

The most repeated idea across every ASX intraday journal I read: only enter where a large resting order sits behind you and little stands in front of you. How to judge protection relative to volume, size your position from it, and exit the moment it goes.

Protection: The Liquidity You Lean On


{/* banner prompt: Cinematic realistic photograph, 16:9 wide banner composition: a dim home trading office viewed from directly behind an empty office chair, one monitor on the left showing a faded blurry candlestick chart, the main central monitor glowing with sharp stacked horizontal green and red depth bars, reflections on a dark desk, no person in frame. Muted teal and warm amber colour grade, soft natural light, shallow depth of field, high detail, photorealistic, no readable text, no numbers, no logos, no visible faces. */}

This is part one of the [ASX order book series](/blog/2026/10/12-reading-the-asx-order-book-how-intraday-traders-actually-find-edge/). We start with the idea that surprised me most when I read through several Australian intraday traders' public journals: the profitable ones barely talk about charts.

They post charts, sure. But when they explain *why* they took a trade, the explanation is almost never "it broke the trendline" or "RSI was oversold." It's things like: there was a big bid sitting underneath, nothing on the offer, the stock gapped on one seller, the surplus flipped in the last few seconds. Every one of those is an order book observation.

<KeyPoints>

- A chart is a record of the past. The tape shows who is forcing now; depth shows who is waiting.
- On the ASX, tick size relative to price shapes how queues build and when they break.
- Charts frame the question. The order book answers it.

</KeyPoints>

## Three layers of market information

It helps to separate what you can see on a screen into three layers.

<Table data={
    {
        headers: ['Layer', 'What it shows', 'Tense'],
        rows: [
            ['Price chart', 'Prices at which trades already happened, summarised into bars', 'Past'],
            ['Tape (time and sales)', 'Each trade as it prints, its size, and whether it hit the bid or lifted the offer', 'Present'],
            ['Market depth (level 2)', 'Resting buy and sell orders waiting at each price, and how many of them', 'Future intent'],
        ]
    }
} />

A chart is a **receipt**. It is a compressed record of transactions that have already been completed. By the time a candle closes, the people who caused it have already acted.

The tape tells you **who is forcing** right now. When a buyer crosses the spread and lifts the offer, they are paying up for urgency. A run of aggressive prints at the offer is a buyer who wants in more than the sellers want out.

Depth tells you **who is waiting**. Resting orders are intentions: "I will buy 200,000 at 1.45 if you come to me." They can be cancelled, and some are fake (that gets its own post), but in aggregate they describe the terrain that price has to travel across.

Intraday traders who live on short holding periods care about the next few ticks. For the next few ticks, the present and the future intent matter far more than the past.

## Why the ASX is especially readable

The ASX is a relatively small, concentrated market. For many small and mid caps the order book is thin enough that a single participant's intentions are visible. That cuts both ways: thin books are dangerous, but they are also legible in a way that a deep US mega-cap book is not.

The ASX tick size schedule matters here too, because it controls how many orders pile up at each price level.

<Table data={
    {
        headers: ['Share price', 'Minimum tick', 'Effect on the book'],
        rows: [
            ['Up to 10 cents', '0.1 cent', 'Each tick is 1% or more of price. Queues are long, moves are lumpy.'],
            ['10 cents to $2.00', '0.5 cent', 'Common hunting ground for small cap traders. One tick can be 0.25% to 5%.'],
            ['$2.00 and above', '1 cent', 'Ticks are small relative to price. Depth is spread across many levels.'],
        ]
    }
} />

A 20 cent stock with a half-cent tick moves 2.5% per tick. That means huge queues build at each price, and when a queue gets eaten the price jumps. Many of the setups in this series are really just about predicting when a queue will hold and when it will be eaten.

(Always check the current ASX operating rules. Market structure details change over time.)

## What the depth readers were actually looking at

Across the journals, the same few depth features kept coming up.

**Size relative to normal.** A 100,000 share bid means nothing on its own. In a stock that trades 50 million shares a day, it is a speck. In a stock that trades 300,000 shares a day, it is a wall.

**Stacking.** Several levels of large orders piled on one side. Stacked offers act like a ceiling, stacked bids like a floor.

**Absence.** Often the most important feature is what is *not* there. A stock gapping up with no fresh bids underneath and plenty of offers above it has nothing holding it up.

**Refresh behaviour.** An order that keeps reappearing at the same price after being hit suggests a much bigger participant than the visible size. A wall that vanishes the moment price approaches was probably never real.

**Aggression on the tape.** Is the size printing at the bid or at the offer? Is the visible wall actually being eaten, or just sitting there?

## A small illustration

Here is a synthetic snapshot of a hypothetical 50 cent stock shortly after the open.

<Table data={
    {
        headers: ['Bid volume', 'Bid', 'Offer', 'Offer volume'],
        rows: [
            ['40,000', '0.495', '0.500', '35,000'],
            ['55,000', '0.490', '0.505', '20,000'],
            ['900,000', '0.485', '0.510', '15,000'],
            ['60,000', '0.480', '0.515', '25,000'],
            ['30,000', '0.475', '0.520', '10,000'],
        ]
    }
} />

A chart of this stock might show nothing special: a small green candle. The depth shows a very large bid two ticks below the market and a thin offer side all the way up. If that 900,000 bid is genuine, a buyer at 0.500 has a clearly defined risk: if 0.485 starts getting eaten, they are wrong and they leave. The reward side has very little standing in the way.

That is the kind of reasoning these traders apply, in a few seconds, dozens of times a day. Notice it says nothing about the trend, the moving averages, or the pattern.

## So are charts useless?

No, and none of the traders said they were. Charts showed up in three supporting roles:

- **Context**: where are the obvious daily levels, prior highs, the last capital raise price? Those are places where resting orders tend to cluster.
- **VWAP**: a common reference for whether the day's buyers or sellers are in control, and a natural place for stops.
- **Review**: after the trade, a chart with your fills marked on it is the best way to see whether you entered and exited well.

The pattern I saw was that charts frame the question and depth answers it. Beginners do it the other way round: they decide from the chart and then are surprised when the order book walks all over their entry.

## The practical takeaway

If you want to start thinking like a depth reader:

<Steps>

1. Pick two or three stocks in play each morning, not twenty.
2. Watch their depth for a week without trading. Note when large orders appear, vanish, refresh, or get eaten.
3. Every time price moves sharply, rewind and ask: what did the book look like just before?
4. Only then start taking small trades where the book gives you a clearly defined place to be wrong.

</Steps>

That last idea, a clearly defined place to be wrong, is what these traders called protection. It's the subject of the next post, and it's the most repeated idea in every journal I read.

<SeriesNav series="asx-order-book" />

<Disclaimer />


0239093a3947f95e7ef19523e86f973852f3e4387ff73bbe324c6a67673257b4

Why profitable ASX intraday traders rely on market depth and the tape instead of chart patterns, and what level 2 actually tells you.

A chart shows what already happened. The order book shows who is waiting and the tape shows who is forcing. Why profitable ASX day traders make decisions from market depth and time and sales, and use charts only for context.

Why the Best Intraday Traders Barely Look at Charts


{/* banner prompt: Cinematic realistic photograph, 16:9 wide banner composition: a quiet trading desk before dawn in a Sydney apartment, three monitors glowing with soft out-of-focus green and red horizontal bars like an order book ladder, a cup of black coffee steaming beside a keyboard, city lights and harbour faintly visible through the window behind. Muted teal and warm amber colour grade, soft natural light, shallow depth of field, high detail, photorealistic, no readable text, no numbers, no logos, no visible faces. */}

Most trading content on the internet is about charts. Moving averages, candlestick patterns, RSI divergences, breakouts above resistance. It's an easy thing to teach because a chart is a picture, and pictures make good screenshots.

Over the past few months I've been reading, chronologically and in full, the public trading journals of several Australian intraday traders. Thousands of posts, screenshots of order books, trade reviews, monthly dashboards, rants, confessions, and the occasional lucky trade they openly admitted they didn't deserve. These were people trading the ASX for a living or working towards it, at very different stages: one at the start of the journey, one grinding through the middle of it, one well past the point most people ever reach.

What struck me was not how different they were. It was how often they arrived, independently, at the **same handful of ideas**. And almost none of those ideas live on a chart.

This post is the hub for a series built around those shared ideas.

<KeyPoints>

- A series built from patterns that kept recurring across several Australian intraday traders' public journals.
- Rule: a technique only appears here if at least two different traders used it.
- Four tracks: order book craft, the business of trading, psychology, and special topics.

</KeyPoints>

## Why a series, and why these rules

I'm not going to name anyone, quote anyone, or retell anyone's story. These journals were written in public, but they were written for accountability, not to become somebody else's blog material. So the series follows a simple rule:

**A technique only makes it into a post if it showed up in the journals of at least two different traders.**

That filter turned out to be useful for more than privacy. A trick that only one trader uses might be a personality quirk or a lucky regime. A principle that keeps reappearing across people with different styles, account sizes and timeframes is much more likely to be structural: something about how the ASX itself works.

Every number in the series is either from our own market data, a labelled synthetic example, or a composite. Every example ticker situation is illustrative.

## What kept showing up

Here's a compressed version of the overlap. Each row became one or more posts.

<Table data={
    {
        headers: ['Theme', 'What the traders converged on'],
        rows: [
            ['Stocks in play', 'Only trade names with a fresh catalyst, unusual volume or a gap. Everything else is noise.'],
            ['Depth over charts', 'The decision comes from the order book: who is waiting, where, and in what size.'],
            ['Protection', 'Enter where a large resting order sits behind you, and nothing sits in front of you.'],
            ['The opening auction', 'The indicative price, the surplus and late order changes tell you if the open is mispriced.'],
            ['Gap cause', 'A gap from one big seller is a different trade from a gap caused by real news.'],
            ['Time stops', 'If the move does not come almost immediately, the thesis is wrong. Scratch it.'],
            ['Sizing by grade', 'Size up only the best setups. Size down in chop and thin books.'],
            ['Fewer trades', 'The best months tend to have the fewest trades.'],
            ['Costs', 'Brokerage quietly eats a scalper alive until size and selectivity improve.'],
            ['The blow-up pattern', 'Nearly every catastrophic loss starts with refusing to cut and adding to a loser.'],
            ['Psychology', 'Year one is tuition. Bad trades that pay are the most dangerous trades of all.'],
        ]
    }
} />

## The roadmap

The series runs in four tracks plus a closing set of posts about traders themselves. Start anywhere: each post stands on its own, and links to the next.

<Roadmap
  layout="single"
  title="Your path through the series"
  subtitle="Five stages, 30 posts. Each one stands alone and links to the next."
  cta={{ text: 'Start with part 1', href: '/blog/2026/10/13-why-the-best-intraday-traders-barely-look-at-charts/' }}
  steps={[
  {
    title: 'Track 1: Order book craft',
    summary: 'How depth, the tape and the auctions actually tell you something.',
    accent: 'blue',
    href: '/blog/2026/10/13-why-the-best-intraday-traders-barely-look-at-charts/',
    link: 'Start this track',
    items: [
      { title: 'Why the best intraday traders barely look at charts', href: '/blog/2026/10/13-why-the-best-intraday-traders-barely-look-at-charts/' },
      { title: 'Protection: the liquidity you lean on', href: '/blog/2026/10/14-protection-the-liquidity-you-lean-on/' },
      { title: 'Reading the ASX opening auction', href: '/blog/2026/10/15-reading-the-asx-opening-auction/' },
      { title: 'Why did it gap?', href: '/blog/2026/10/16-why-did-it-gap-mechanical-gaps-vs-information-gaps/' },
      { title: 'Cross-market leads and the indicative open', href: '/blog/2026/10/17-cross-market-leads-and-the-indicative-open/' },
      { title: 'Spoofs, icebergs and reloading orders', href: '/blog/2026/10/18-spoofs-icebergs-and-reloading-orders/' },
      { title: 'When the tape stops confirming', href: '/blog/2026/10/19-when-the-tape-stops-confirming-time-stops-and-liquidity-exits/' },
      { title: 'Measuring order book imbalance in code', href: '/blog/2026/10/20-measuring-order-book-imbalance-in-code/' },
    ],
  },
  {
    title: 'Track 2: The business of trading',
    summary: 'The numbers that decide whether the craft actually pays.',
    accent: 'amber',
    href: '/blog/2026/10/21-win-rate-vs-payoff-two-shapes-of-a-profitable-trader/',
    link: 'Start this track',
    items: [
      { title: 'Win rate vs payoff', href: '/blog/2026/10/21-win-rate-vs-payoff-two-shapes-of-a-profitable-trader/' },
      { title: 'Commission drag', href: '/blog/2026/10/22-commission-drag-the-silent-partner-in-every-scalp/' },
      { title: 'Size by grade, not by mood', href: '/blog/2026/10/23-size-by-grade-not-by-mood/' },
      { title: 'The averaging-down death spiral', href: '/blog/2026/10/24-the-averaging-down-death-spiral/' },
      { title: 'Fewer trades, better months', href: '/blog/2026/10/25-fewer-trades-better-months/' },
      { title: 'Execution hygiene', href: '/blog/2026/10/26-execution-hygiene-hotkeys-size-guards-and-borrow/' },
    ],
  },
  {
    title: 'Track 3: Psychology and development',
    summary: 'What holds it all together over years.',
    accent: 'indigo',
    href: '/blog/2026/10/27-the-apprenticeship-curve/',
    link: 'Start this track',
    items: [
      { title: 'The apprenticeship curve', href: '/blog/2026/10/27-the-apprenticeship-curve/' },
      { title: 'The variable reward trap', href: '/blog/2026/10/28-the-variable-reward-trap/' },
      { title: 'Tilt', href: '/blog/2026/10/29-tilt-the-cycle-and-the-circuit-breakers/' },
      { title: 'Journaling that changes behaviour', href: '/blog/2026/10/30-journaling-that-actually-changes-behaviour/' },
    ],
  },
  {
    title: 'Special topics',
    summary: 'Event playbooks and deeper dives.',
    accent: 'slate',
    href: '/blog/2026/10/31-index-rebalance-days-and-the-closing-auction/',
    link: 'Start this track',
    items: [
      { title: 'Index rebalance days', href: '/blog/2026/10/31-index-rebalance-days-and-the-closing-auction/' },
      { title: 'Fat fingers and panic opens', href: '/blog/2026/11/01-fat-fingers-and-panic-opens/' },
      { title: 'Surviving earnings season', href: '/blog/2026/11/02-surviving-earnings-season-as-an-intraday-trader/' },
      { title: 'Halts, placements and SPPs', href: '/blog/2026/11/03-halts-placements-and-spps-corporate-action-mechanics-for-traders/' },
      { title: 'When your setup stops working', href: '/blog/2026/11/04-when-your-setup-stops-working/' },
      { title: 'Commodity shock days', href: '/blog/2026/11/05-commodity-shock-days-how-resources-stocks-lag/' },
      { title: 'Red flags in a quarterly cash flow report', href: '/blog/2026/11/06-red-flags-in-a-quarterly-cash-flow-report/' },
      { title: 'Why paid signal groups fail', href: '/blog/2026/11/07-why-paid-signal-groups-fail/' },
    ],
  },
  {
    title: 'Traders themselves',
    summary: 'Who they are, and what they share.',
    accent: 'rose',
    href: '/blog/2026/11/08-the-liquidity-harvester-and-the-catalyst-sniper/',
    link: 'Start this track',
    items: [
      { title: 'The liquidity harvester and the catalyst sniper', href: '/blog/2026/11/08-the-liquidity-harvester-and-the-catalyst-sniper/' },
      { title: 'The human HFT', href: '/blog/2026/11/09-the-human-hft-what-discretionary-scalpers-do-that-algorithms-cant/' },
      { title: 'What profitable ASX day traders have in common', href: '/blog/2026/11/10-what-profitable-asx-day-traders-have-in-common/' },
    ],
  }
]} />

## Who this is for

If you've traded the ASX for a while and you're stuck on charts, indicators and "it should have worked," this series is aimed squarely at you. If you're brand new, read Track 3 first. It will save you money.

If you build systems, as we do at tyolab, the order book craft is surprisingly codifiable. That's partly why I'm writing this: the heuristics these traders apply by eye in a few seconds are exactly the kind of thing we can measure, backtest and either keep or throw away. It fits the way I already think about [indicators, strategies and alpha](/blog/2026/09/13-indicators-measure-strategies-decide-alpha-is-what-survives/) and about [a trading system in three layers](/blog/2026/09/14-a-trading-system-in-three-layers-measure-decide-account/).

<Callout type="warning" title="A word on survivorship">

People who journal in public are not a random sample. The ones still posting years later are, almost by definition, the ones who survived. Their lessons are valuable precisely because they paid for them, but don't read this series as "do this and you'll make money." Read it as "this is how people who did make it ended up thinking."

</Callout>

<SeriesNav series="asx-order-book" />

<Disclaimer />


ecfc6d0f106ab8b56cee0012ffff606982ece7e133cf878960675ba0384ce0b8

Series hub: how profitable ASX intraday traders read market depth, the opening auction and order flow, plus risk, sizing and psychology lessons.

A new tyolab series on ASX day trading built from patterns that kept showing up across the public journals of several Australian intraday traders: market depth over charts, the opening auction, protection, sizing, commissions and the psychology that holds it together.

Tag: Order Book