Want to learn some basic Level 2 info?

Discussion in 'Trading' started by ron2368, May 3, 2001.

  1. ron2368


    I must have a mental block but I just cant figure out otc level 2 or even the order screen for nyse. I use qcharts for intraday data. I have downloaded and read several webpages and daytrading books devoted to this but I cant get it. Rather than all the fancy stuff Imight need to start with the basic mechanics of its workings. I seem to get more info from watching T&S. Does anyone know of any chat room or can one of the wizards here point me the right way?

    I have been trading for many years( 15) but more as a FT job since 95 ( mostly futures). I decided that even though I probably know quite a bit I am going to just ask away about a few things that I feel uneducated about. Many thanks for readers and/or responders.

    Ron C
  2. Re level II Interpretation:

    Level II has turned into a poker game. Just two to three years ago you could assertain momentum from Level II and actually trade off of it. Now, I find that most of the large prints are "fake" and used by market makers to shake out smaller traders - like me :)

    The best book I've read describing how Level II is used today is: The Undergroundtrader.com Guide to Electronic Trading by Jea Yu.

    I've now stopped looking at Level II and my trading results have improved.

  3. I been trading for quite some time. I don't see much in Level 2 unless something really nuts is going on. (The day CSCO first reported that they were going to miss earnings estimates) when something of that nature is going on it's easy to figure out. There was at one time something like 500,000 on the offer with about 40,000 on the bid. Gee I wonder which was it was going to go. Let's just say I tried to get as much of that 40,000 as I could that day when I saw that. Market makers didn't have time to post fake bids/offers then. Usually they do especially during the middle of the day.

    The specialist is usually the same thing. I get a lot more out of time and sales. The markets aren't in the chaos period like they were not so long ago.

    Watch time and sales, trade high probability patterns with candlestick/volume charts is what I mainly do now. I can still make money but not as easy as it used to be.


    Robert Tharp
  4. ron2368


    Thank you for both of your replies.

    I have always felt that if I just pay attention to my trading setups and stick to the rules I would have more than a better probability of success.

    T&S works for me as I can see prices and better yet the pace of trading... though I'm sure mm's run lots of shares through to get prices where they want them.

    I generally trade off a 60 min chart so I attribute alot of price movement on a smaller time frame like 2 minutes as market noise/ price wiggles and try not to get too wraped up in it.

    That makes me feel better, I canceled my LII service last month, think I will keep it off.

    Market is sure tuff, lots of fake moves and who knows what. I was trading some thin otc stocks and I have fully had it with them. there will be 10000 shares of sells and 500 in buys over a 10 min pd and the price goes up. I am stumped on that!!

    thanks again
    Ron C
  5. gh1


    One thing i really like about LII is the ability to check irregular or out of the market prints.

    If i am watching candles, and have entries or exits based on them, an irregular print will flash a buy or sell on the candle. I always confirm the mkt is actually at the print with LII before i make a move.

    LII is an easy check for where the mkt really is. Time and sales may do the same thing -- i don't watch it. But i will take a look at it today. Some software/data feeds will actually print irregular in the T&S window -- mine doesn't.

    2 cents
  6. dozu888


    L2 is useless for making entry/exit decisions. It is a poker game.

    However, it is useful for order execution.. if you want to sell into rally or cover short into dumping, you can gauge the ask/bid balance on L2, and decide roughly the price you want to post on an ECN.... If you have a short position and the stock is at the last leg of panic (as you think), you can post an outside bid on ECN and squeeze an extra 1/4 or even 1/2 out of it.