what is level 2 and how can you use it when you're day trading talking about
level 2 order book and how it works breaking it down in the most simplest
easiest to understand terms in this video so stay tuned what's going on guys
so I'm getting a lot of questions people asking about level 2 it ok can you
explain level 2 I don't understand level 2 how do you read level 2 it's very
simple for me and it's hard sometimes really kind of think about like oh maybe
somebody doesn't understand what level 2 is what it means to read level 2 now one
thing I want you guys understand is level 2 can't be your friend and level 2
can also be your enemy level 2 can be highly manipulated the
level 2 order book can show orders that really don't exist so you need to be
careful you need to understand that sometimes people are manipulating the
price by using level 2 and what they do is they'll help flash a large sell order
or they'll flash a large bid and then take that bit away and crash the price
and I see this happen a lot a lot of times in the small caps people will do
this with level 2 they'll manipulate the price and they'll try to move the price
around by flashing these fake orders so right now we're looking here at BDR
you can see this chart over here you can see the time and sales and you can see
the level 2 here now when I say level 2 basically it's showing me the order book
there's a level 1 level 1 is basically showing the bid and the ask and you can
see here level 1 it's showing 125 is the bid and 126 is the ask the bid is what
somebody is willing to pay the ask is what somebody is wanting to be paid for
to sell their shares right now you can see it's showing arca and then the edge
network and these are gonna be different routes for different brokers and stuff
like that people will use different brokers and different routes so you'll
see the different routes here on the side is gonna be these four letters
they're showing 121 it's showing one there that one is showing the amount of
shares they're willing to pay for that price now let's say I don't want to show
my size let's say I want to sell and I want to sell it 123 but I only want to
show that I'm only selling 100 but I'm actually selling 1000 I can adjust that
in my montage so that only shows that I
have 100 shares for sale when someone's trying to buy they're gonna be like
something's weird here I'm trying to buy and it's not moving people will use
level 2 to move the price up and down I've seen it happen over and over where
someone's flashing a big bid on the buy side so let's say someone's putting a
big order out there for 120 and what happens is then people jump above that
big buyer trying to get in front of them trying to front run them and then you
start to get the price movement because people are trying to push the price up
because they're trying to buy in because they see that big buyer sitting then
they think oh there's a big buyer so that must mean the price is gonna go
higher and now the same thing happens on the sell side let's say somebody wants
manipulate the price they might flash a big sell order they're at 128 and what
happens Oh everybody who's trying to sell starts to move their price down
because they see that big sell order that doesn't mean that the actual sell
order is gonna go through doesn't even mean that's a real sell order it's just
somebody spoofing the price and just trying to manipulate the price by using
level 2 and we see this happen all the time so you need to be careful it's not
always gonna be exact if you see ok there's somebody selling 100 shares
they're at 124 that doesn't actually mean there's only 100 shares sitting
there a lot of times people like I said will hide their size so you can see
right now level 2 is showing that there's only 100 shares there well
people are buying the ask and it's not moving the amount of shares so again
it's very simple on the left side is gonna be the buyers on the right side is
gonna be the sellers when you put your order out there with a limit order you
will be on the left side now if you want to buy with a market order that means
you're gonna get filled on the ask so right now if I want to get a fill out a
thousand shares boom I would buy there with a market order and that would fill
me at a dollar 24 it would not show my order I'm basically just buying the
market the markets gonna be the ask to sell at 124 and someone's willing to buy
at 124 that's the market and so I'm gonna get filled at now if I want to get
filled at 122 I need to use a limit order because that means I don't want to
pay the market price which is gonna be 124 I don't want to pay that so I need
to put a limit order out there at 122 right below that trying to get filled on
a little bit of a dip or a little bit of a pullback because I don't want to pay
the full market price and you right now okay 120 is showing a lot of
selling pressure someone's buying there okay it gets eaten out now we're going
down again you're seeing level 2 then you're seeing the time of sales as this
is crashing you can see people removing their orders and then adjusting the
price there and doing stuff with the price as it was pulling down he saw that
big buyer sitting there at 118 well then all of a sudden he was gone again now
you see 122 we have a lot of selling pressure they're showing you know 3,000
shares for sale they're at $1 22 and that's pushing the price down because
people are sitting there $1 21 and that's kind of just like right in the
middle there battling okay who's gonna jump above this 121 and buy those shares
at $1 22 level 2 is just showing the orders that are out there limit orders
that are on the market on the order book right now on $1.00 21 someone's trying
to sell at $1 22 it's that simple and that easy
there's really nothing more to it but there is like I said a lot of little
weird things going on with level 2 we can see this a lot so you need to
understand that just because the level 2 looks like there's not much selling
pressure doesn't mean there's not a hidden seller doesn't mean that there's
not gonna be a big or just pop up out of nowhere
you got to remember everybody else is also looking at level 2 and people are
basing their trades off of that and they're also trying to manipulate the
price and you know they're trying to sell or trying to get out I'm trying to
show their size if someone's trying to push the price up they might be showing
more size and they're actually willing to buy so you need to understand that
this isn't always correct there's gonna be some weird things going on level 2
it's an art form there's people that are really really good at reading level 2
they're very fast to interpret what's going on and also over time you'll start
to realize hey this guy is not a real seller he's just trying to spoof he's
trying to move the price down or the same thing vice versa if there's a big
bid popping up it's kind of just sitting there large size if it's not really
moving that's someone trying to manipulate the price there it is level
to make sure you're using it you need to see what's going on level to the order
book and see kind of what is going on with the market and where people are
buying or people are selling out there it is
Oh