People should keep in mind that L2 can be heavily manipulated and what you see, in most cases, is not the true order flow. People should pay close attention to the 'Sneaky Tactics' section because many traders do similar activities on a smaller scale than the example. Traders also have the capability to show their orders at an incorrect price on L2, or not show their orders at all!
Below is a copy/paste from TradeStations ordering capabilities:
• Show Only Orders Imagine placing an order to buy 5,000 shares of a stock—but all the while appearing to the world to be seeking to buy only 500 shares...With TradeStation's Show Only Orders , you can conceal the full number of shares you're actually seeking to buy from the marketplace. This feature is designed to help you minimize market impact and potentially help you get a better fill on thinly-traded stocks, or when you're buying large quantities of more heavily-traded stocks. Here's how it works. You enter a sell order for 5,000 shares, for instance, but choose to have fewer shares (let's say 500) show up on the Level II screen. The result is that you appear as a 500 share offer until your entire order is filled, even though your order is actually for a total of 5,000 shares. And while you're filled in increments, your commission is calculated as though you placed only a single trade.
• Non-Display Orders TradeStation's Non-Display Orders allow you to conceal your order altogether from the market. When you place a trade and click on the "non-display" option, your order is not displayed on the Level II screen—or even on the ECN books—but your order can still be filled by market activity.
• Discretionary Orders Imagine placing an order to buy WXYZ stock at 100 limit — but only appearing to be willing to pay 99.90 on the Level II screen...With TradeStation's Discretionary Orders , you can now avoid disclosing the actual price you're willing to pay for a stock. It's designed to help you try to get a potentially better fill price, without losing the opportunity to have the order filled at the "actual" limit price you are willing to accept. So let's say you'd like to enter a limit order of 99.90, but are actually willing to pay up to 100 to have your order filled faster. After entering the limit order of 99.90, you simply have to click on the "Discretionary" button on TradeStation's Order Bar and enter .10 in the price box. The result? You may be filled within the 99.90 - 100 price range, without ever appearing on the Level II screen as a buyer willing to pay more than 99.90.
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