level 2 OPINIONS please

Discussion in 'Order Execution' started by marketsurfer, Apr 12, 2002.

  1. i would like to hear your opinions on level 2. is L2 hype or still a viable trading tool ??
  2. What is your time frame? If you are scalping, you pretty much have to have it, but as you extend your time frame it becomes less necessary.

    "Level 2" is a great buzz word for selling worthless trader educational products.
  3. I don't think it's very useful with decimalization and Supersoes I hardly look at it when getting ready to exit a position. I wonder what the Level 2 scalpers do nowadays.
  4. Your signature made me look it up.

    Dot-Com Season of the Witch

    October 30, 2001
    By John C. Dvorak

    When I look out my window,
    Many sights to see,
    And when I look in my window,
    So many different people to be...
    You've got to pick up every stitch,
    The rabbits running in the ditch,
    Beatniks are out to make it rich,
    Oh, no, must be the season of the witch.

    —Donovan, pre-Internet song lyrics

    The Donovan song "Season of the Witch" appeared before the stock market crash of 1969. When the song is sung today, the lyric "Beatniks are out to make it rich" is usually replaced with "Hippies are out to make it rich." In fact, many of the problems the industry is going through today are attributable to the lingering greed of the baby boomers, the crackpot notions of New Age nutballs, and the simple nuttiness and idealism of the one-time hippies.

    The decline began with the idealistic notion that the Internet was some sort of great liberating force. For the first few years, the forces of revolution battled with the forces of mercantilism. The first appearance of banner ads on Web pages was cause for alarm. All the early Internet mavens were dead set against any sort of advertising on the Net. The initial quasi-socialistic view of the Net mandated that everything be free.

    This thinking soon devolved into West Coast libertarianism, which led the Net into a deterioration of porn, spam, and viruses. The assault of unwanted communications postponed acceptance of e-mail as the primary form of communication. It also stalled the acceptance of the Web as a tool for knowledge access, as the assaulted masses closed rank within the confines of the feudal castle known as AOL, where 30 million core Internet users now live and honestly believe that AOL is the Internet. During this transition arose the anomaly known as the "dot-com phenomenon."

    Such craziness hasn't occurred since the Dutch tulip market of 1636, when bulbs were traded and valued to be worth more than most people's annual incomes. During the peak of tulip mania, some observers claimed that the entire world's financial market would be tulip-based. It was a "new economy."

    The concept that the economy would change fundamentally because of tulip bulbs is no less wacky than the claims of a new economy suddenly emerging because of a hodge-podge computer network filled with security holes.

    During the "new economy," Internet IPO run-ups, the nuttiness of the hippies, and the New Age movement came into play. There was no rationale for any of it. But who needs a rationale when you have insanity? The mania was aptly led by ex-hippie baby boomers and their naive 20-something minions, who honestly believed that just because they graduated from Stanford Graduate School of Business, they actually knew something. These wunderkinder became the CEOs, the rage, then the scapegoats.

    Track down any of the players in this game and you'll find a preponderance of aging Grateful Dead heads. You'll discover that many of the wunderkind CEOs closed down their companies for a week so their employees could go to Burning Man, a brain-dead "art fest" in the Nevada desert best described as a drug bender highlighted by naked men on bicycles. Everyone got to cheer and do pagan chants as a three-story wooden icon of a man was burned to the ground on the last day. The dot-com folks were deeply into this and other crackpot scenes. Does this give us any insight into the new economy?

    The giveaway for me was the New Age use of language. The dot-com scene became more of a cult than a scene, with its own terminology. E-business was about viral marketing, vortals, clicks and mortar, disintermediation, prosuming, push, channels, communities, B2B B2C, C2C, and so on.

    Everything operated on a whole new time scale: Internet time! If you even hinted that this was all hogwash, then you "just didn't get it." That phrase came directly out of Werner Erhard's defunct est training, which was so popular in the self-actualization 1970s. It was used to expunge nonbelievers from the cult.

    Well, the cult is dead, and the new economy is just the old economy. We're left with an Internet that is a spam-riddled shambles. We have streaming-media nonevents, thousands of dead dot-coms, broadband malaise, and a tech industry left in a mess. Let's hope we don't go through this again anytime soon.
  5. thug,

    thanks for the OT reply. for some reason, i can't get those lyrics out of my head.

  6. You must be an Eliot wave freak. I just know it.
  7. jaiko


    most of the time level2 is useless ---- you simple do not know if 100 shares mean 100 or 100 thousand ---so it is a little bit confusing----but sometimes it helps a little
  8. My cable was out from Tuesday afternoon until today, so I was stuck with a dial-up connection. Since RT is such a bandwidth hog, I was down to a "scaled down" page with some charts and no Level 2.

    I really didn't miss the Level 2 at all!
  9. Seanote

    Seanote Guest

    Level 2 is a necessity, especially if you're scaplping. If you don't think it is then you need to really learn how to read L2. Watching ECNs vs. MMs and how the MMs act with the focus on the BIG MMs is very important. If a Goldman (GSCO) is on the bid displaying 1,000 shares and you see continuous prints in T&S at the price GSCO is displaying while not decremeting their share size, that is the GSCO "soaking up the bid". This is short-term buy signal since this generally means GSCO is accumulating shares or covering a large short position.
    When you have ECNs line up in a row on one side or the other (we'll assume the Ask) and there are only MMs on the bid, this is a huge sell signal. If you look at the MMs on the bid all lined up at the same price, they generally will execute 100 shares or so, whatever their obligation is, then almost simultaneously all the MMs will leave the bid and the price will quickly drop. Also, notice that T&S does not always correlate to the bid and ask. Sometimes the prints in T&S are delayed reports from MMs which have up to 90 seconds to print without declaring it delayed so T&S is a small indicator of a true market. Bid/Ask is the most important measure of the market price. Hope this helps.
  10. sea,

    thanks for the detailed reply.


    #10     Apr 12, 2002