how to make use of the level II

Discussion in 'Order Execution' started by joema, May 27, 2004.

  1. joema


    i mean, is there any skills of watching the level II screen?

    i memorized some ECNs, market makers's symbol

    and i know that's not enough, could you guys tell me ?

    how to get started
  2. watch the axe.

  3. Level II to me is useless anymore. MM's sit on both bid and ask which is difficult to interpret their true intentions. About the only useful part is Time/Sales screen w/level II where I watch both for increase in speed of selling or buying along with a big increase in volume. Level II gives me an idea of where I want to enter or exit a trade based on price levels and the interest at that price level. Of course, I just daytrade and scalp where Level II actually still means something. Swing trading has no use for Level II or T/S screen.

    Otherwise, I doubt anyone actually trades profitably just using Level II these days. Of course, it's just my opinion.

  4. Turok


    I used to LOVE the LVL II and could scalp it fine. It's absolutely useless to me now -- don't even pay to have it around.


  5. There is value to Level 2, however it mostly lies in scalping (going for a few cents).

    In scalping you are looking for strength or weakness at the bid or ask. Looking at who and how much size there is at each price. You can often see the smaller moves coming by the bid or ask side "loading up" and the opposite side getting smaller.
  6. In most of the liquid stuff it is useless these days, just watch with a booktrader what happens. Read the story about the "spoofer" in the Eurex, but it is also visible in the forex and currency futures.

    I wasted a lot of time on this and now do not even look at anything else than price and actual traded volume / ticks.
  7. tradARRR


    level 2 is hard to rely on- big sizes are shown, but whether you can get a fill against that size as an exit is a different story!!!!!

  8. i still scalp illiquid, wide spread stocks, and use Lev II religiously. if you study the trading patterns, speed of climbs and drops, market maker fakeouts, computerized ECN pennying, and practice ISLD hiding on just a handful of stocks, you'll be suprised at how easy it'll be to predict how they'll move.

    i make about 20 round trips a day, and about 18 of them are profitable. only problem is, since I'm only aiming for 5 or 6 cents per trade, those 2 trades that tank wipe out 5 good trades a piece.. but it works for me. i couldn't, at gunpoint, tell you stochostics, oscillators, candlesticks, moving averages, macd, greeks, and support & resistance influence stock and option movement.
  9. Turok


    It just goes to show that there is something for everyone, but I do have a couple questions...

    First, I'm gonna quote you on a few things and make a few assumptions from those statements. Please correct any assumptions that end up different from reality.

    A: You say you scalp "illiquid" stocks. From this I will assume that you won't be moving much size (not a critisism, I trade small size as well). Are you able to scalp even a 500 share lot in these "illiquid" stocks?

    B: You are looking for ~5 cents per trade.

    C: You have ~18 winners per day

    D: Your losses per losing trade are ~12.5 cents (5 x 2.5 - from your statement that 2 losers wipe out 5 winners)

    E: we are now down to 65 cents (13x5 ) daily profit times your share size.

    If you can scalp 500 shares in this illiquid stocks that puts you at $325 per day. Now, I'm in no way talking that money down as that is more than probably 95% of ET members make, but as a guy who has scratched like that for those kinds of dollars before I can tell you that there are a lot easier ways to make $350 a day than staring down a LVL II.

    I'm glad it's working for you. While you have that nice steady income from your porfolio, you might want to think about working on some additional methods that will scale and require much less maintenance.

    Nice work on those scalps btw. Beginners thing it will be easy -- it's not and most will lose, lose, lose at that game.


  10. BSAM


    I could tell that at least two of these can DEFINITELY influence stock movement. (And I wouldn't even have to be at gunpoint!!)
    #10     May 27, 2004