Level 2 | Trading Lingo
Level 2 | Trading Lingo
In addition to understanding Level 1 and the bid/ask, day traders need to understand Level 2. Lets start by talking about the Bid. If the bid is 10.00, there is a buyer sitting waiting to buy shares at 10.00. But are there other buyers also lined up? By using Level 2 data, we can see buyers at 9.99, 9.98, 9.97, and so on. We may see bids stacked tightly on the Level 2, or we may see them spaced apart such as 9.95, 9.89, 9.74, 9.64. When we see full market depth on both the Bid side and the Ask side we are seeing complete level 2. Although Level 2 is shown with Bids on the Left and Ask on the Right, some software choose to show it as a long line going left to right, with the current price being in the middle. In addition to seeing the prices where orders are listed, Level 2 also shows the number of shares for each order, and the market maker or ECN (electronic communications network) that is routing the order.