level 2 quotes

You’ve made it this far in your trading career, but there’s still more information that you’re not entirely sure about. Well, if one of those issue areas is Level II, you’ve come to the right place, my friend.

Welcome To Level 2

Level 2 quotes can provide insightful information into a specific stock’s price action. Getting into the nitty gritty of it all, Level II can also give you information as to what types of traders are buying or selling a stock, how the stock may move in the coming term, and countless other details that can only benefit you, as a trader.

First and foremost, we need to answer the question, “What Is Level 2?” To put it as simply as we know how Level II is the order book for Nasdaq stocks. When someone submits an order for penny stocks, they are ordered through various channels called market makers. Level II gives you access to a list, in ranking order, of the best bid for said stock and what the ask prices are for all market participants. When day trading, its arguably invaluable to know what types of people are investing in a penny stock at any given time.

Now that we have a comprehension of Level II, we need to discuss the different players in the market. We have the aforementioned market makers whose role is crucial to the market because they typically are the one’s providing liquidity. These people are required to buy and no othern action is taking place, they literally make the market happen.

After them, we have ECNs. “What’s an ECN” you ask? These are Electronic Communications Networks. These are computer-powered ordering systems that can process batch orders, and they can be used by anyone, even institutional traders. Last, but certainly not least, we have Wholesalers who executive orders on behalf of online brokers.

The most important details to know about Level II are that you have the ability to know exactly what type of buying is occurring — be it retail or institutional — by simply analyzing the market participants who are making the trades.

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