Day trader level 2

Hi Ed, If the tape is green, doesnt it mean the transactions are hitting the ask? Instead of your stated red? I'm not sure if you just mixed it up. Thanks so much for this blog - I am an aspiring trader and am currently deciding whether I should leave my day job as well.

I am new and still learning as much as I can.

All I can say is my passion regarding trading is unmatched - I just love it and the potential we all have to make it here.

Would love to work with you someday.

Sotheby's (NYSE:BID), SPDR S&P ETF (ETF:SPY) - Day Trader's Guide to Understanding Level 2 Quotes | Benzinga

Thanks so much for what you do. Yeah, had it right on the first inference but got it backwards on the 2nd one. Thanks for catching that. Also, thanks for your comments Ed.

This comment has been removed by the author. Trade for Skill, Count the Bills! Sunday, March 22, How I Use Level 2. One thing I found out quick when I started was that understanding level 2 quotes was vital to my success day trading.

Level II Quotes - Primary Tool for Active Traders - Tradingsim

Many of us newbies are intimidated by the information shown in a level 2 window. All of those constantly changing numbers coming at you makes keeping up with it seems like an impossible task. I used to watch it for hours never understanding what I was seeing or how to use it. What I'm going to share in this blog is how I use it to help me as I am trading. To put it simply, a level 2 window is split in to two sections - the bid side and the ask side.

The bids, which are located on the left, show the total number of shares that buyers wish to purchase at the corresponding price. The bid side is arranged in descending order, with the highest bids on the top and lower bids following below.

The ask side is arranged in an ascending order with the lowest ask on the top with higher prices below. This is an example that helped my understand Level 2 a little better.

A level 2 quote window for this scenario will look like this: It is important to understand that a trade will only occur when a buyer and seller have identical pricing constraints.

To illustrate this, Amanda, who lives a block away, is in desperate need of cash and has an identical car to sell. Now that Steve and Amanda have a mutually agreed upon price, a transaction will occur and the level 2 box will reflect the instance accordingly. The sale is going through at Steve has purchased 1 car and still has an open order for three additional cars.

Since Amanda's order was filled, she is now removed from the level 2 box. An example is shown below. Since the Level 2 quotes update in real time, I use it to help me determine the short term direction of a stock. While a level 2 screen can seem somewhat complicated at first, it is a relatively simple entity.

It is merely a mechanism for matching buyers and sellers in an orderly fashion. The only thing that makes it somewhat difficult to comprehend is the speed at which it operates, which just takes getting used to.

It is not hard to understand, but it takes time to get used to the speed that it moves given day traders are trading volatile fast moving stocks. It just takes time to be able to spot when a stock may be under manipulation from a market maker putting false bids or asks to influence traders to make decisions based on what they see.

Posted by AverageJoeTrader at Share to Twitter Share to Facebook Share to Pinterest. Clay March 22, at 8: KMercado January 3, at 3: Ed Martin January 3, at 5: Newer Post Older Post Home.

AverageJoeTrading: How I Use Level 2

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