Interpreting level 2 quotes

Discussion in 'Educational Resources' started by staffpro, Feb 29, 2008.

  1. hey i'm new to everything and i've been doing alot of reading lately and i intend to do so for another while at least until the summer before i start to trade/invest. When i do so i will be starting with about 5k and then increasing to about 10k later, that aside my question for today is regarding level 2 quotes. When you have the bid/ask chart thing with the size and price is the correct way to interpret that like say their is 20,000size bid for 9.00 and then ask size 10,000 at 9.01 that is a 1 cent spread which i still don't know what significance that has aside from the sellers want 1 more cent than the buyers are willing to pay, The other thing i get from that is that for X price level (x being 9/9.01) there is alot more buyers than sellers so they will buy out that price level causing the stock to tick higher let says to 9.01/9.02?

    and the other question is what can you get from all the other rows under the first two? ( the only thing i've been able to kinda interpret is to "see" where most of the buyers are like what they're willing to pay and seeing where most of the sellers are willing to offer. is this correct?


    Lets say it looks something like this

    20000 9.00 10000 9.01
    12000 8.99 20000 9.02
    8000 8.98 20000 9.03
    and so on... ( i know, this is very basic i might post a screen of actual level 2 and try to analyze it here in a post to see if i'm right)

    what can u say about my example above (which i just made up) there are larger sizes in higher price levels? or vice versa larger sizes in lower bid levels? or what happens if all the numbers are relatively even?

    Thank you in advance everyone, i think this will greatly help me to find entry points into my positions when i get around to starting this.