I can't think of anyone that use only level 2 quotes to be consistantly successful. If you did, you must be doing it for a long long time to have the experience to read off of it to make your trades. Like anything else, people will always try to hide their true intentions. People will do passive orders and can hide their orders onto Level 2. People also show something and take it away too. In using Scottrade's velocity and forces, it seemed like a good tool. You see a graphical presentation of buys vs. sell orders and it tells you which outnumber the other. Yet, there are many occasions where you see a big order and yet it does nothing and only to reverse a minute later. You can use Level 2 to get a gage on the market but one has to look at the totality of the circumstances to make the trade. Just my 2 cts.
FWIW, I have made substantial sacrifices to put myself in a position whereby I can watch L2 orderflow - and nothing else - for several hours each day. Still nailing down which products but focus presently US and German bond futures. Bump this thread in 3 years to see how I'm doing.
Watching only the Level2 and time in sales. I could watch just those with no charts and trade. Every day trader should know those two inside in out.
Physical prices do not lead. From the level 2 and time and sales I can tell you what the next 5 prints will be. Physical prices lag information compared with level 2.
Are you trading in NY city? That's my style of trading, along with order routing. Interest in discussing in more detail? I'm currently a rebate trader trading near Wall St.
Don´t stop yourself from something that you thing is correct. Instead of asking questions, take L2 screen, some TS windows, and watch them for some hours, if you cannot see any pattern, it will not be for you. It´s that simple.
The ONLY people I know that are consistently successful read the level 2 quotes mainly. Only time they really use chart is to make sure the stock is active.. maybe to check the trendline
Good luck relying on your gut when you are trying to beat bots that can calculate exact odds for every situation. When your intuition thinks it sees a reoccurring pattern there is someone else who can give exact statistics on that "pattern".