Thursday, May 26, 2011 11:44:15 AM
UNDERSTANDING LEVEL 2 - Why it's important?!
Level 2 (L2, LII) is an essential tool that any serious trader requires. L2 lets you look behind the scenes at what is going on beyond the current bid and ask of a stock and gives you a clear snapshot of how much demand and supply there is at that precise moment in time.
The most basic and fundamental rule of the markets is that there are only two things which make any stock move, supply and demand.
-If there is a lot of demand for a stock, the price will go up.
-If there is a lot of supply, a stock will go down.
-If demand matches supply, the stock will go sideways.
Using CNUV as a prime example:
Notice in CNUV here at the moment that the BIDDERS/BUYERS in the left hand column are priced 2 basis points under the LAST or ASK price trying to pick up shares for LESS than the SELLERS are offering. But more importantly, look at the SELL/ASK column to it's right. Sellers, sensing the market could go up, are pretty THIN all the way up. Which means not a lot of share SELLS represent a uptick in price from .0053 to .0054 to .0055 and so on all the way to .008 really.
When you see a L2 chart stacked like this it means that demand is starting to outweigh supply and could be heading in the POSITIVE PPS direction.
Stacked to the BID side means that SUPPLY is outweighing demand and it will either go sideways, or DOWN in PPS.
Level 2 (L2, LII) is an essential tool that any serious trader requires. L2 lets you look behind the scenes at what is going on beyond the current bid and ask of a stock and gives you a clear snapshot of how much demand and supply there is at that precise moment in time.
The most basic and fundamental rule of the markets is that there are only two things which make any stock move, supply and demand.
-If there is a lot of demand for a stock, the price will go up.
-If there is a lot of supply, a stock will go down.
-If demand matches supply, the stock will go sideways.
Using CNUV as a prime example:
Notice in CNUV here at the moment that the BIDDERS/BUYERS in the left hand column are priced 2 basis points under the LAST or ASK price trying to pick up shares for LESS than the SELLERS are offering. But more importantly, look at the SELL/ASK column to it's right. Sellers, sensing the market could go up, are pretty THIN all the way up. Which means not a lot of share SELLS represent a uptick in price from .0053 to .0054 to .0055 and so on all the way to .008 really.
When you see a L2 chart stacked like this it means that demand is starting to outweigh supply and could be heading in the POSITIVE PPS direction.
Stacked to the BID side means that SUPPLY is outweighing demand and it will either go sideways, or DOWN in PPS.
EL JEFE'S TRADING FOR PROFITS
"I LAY IT OUT FOR YOU TO PLAY IT OUT"
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