Learning NASDAQ level 2

Quote from Gamer:

Can anybody suggest any good, up-to-date training material on level 2? In particular, any recommendation on professional day traders who uses NASDAQ L2 who also coach and mentor?

I have rudimentary knowledge of L2 and would like to learn from a pro. I understand the basics but there are many unanswered questions.

For example:

1. Why would a market maker ever use their own name to post an order? Why can't they place all their orders with the ECNs?

2. Are large orders on ECNs always fake? Can you tell which one is a fake?

3. If the axe is on the best bid and the stock is slowly going up, how can you tell the axe is also not selling through an ECN?

And so on and so forth...
More...

Well I'm not a coach or mentor but I can give you a few tidbits that might help.

1)Although I don't know the answer for sure, I'm guessing Market Markers post under their own name so they don't have to wait in line on the ECNs. I notice MM will get hit a lot sometimes even when no ECNs are being hit.

2) Large orders are not always fake. However it also depends on what you mean by a "large order". I've only traded up to 25K but people I work with will sometimes trade up to 100K and it's completely real. One way to see if one is fake is to watch if there's someone "pushing the stock around" by putting a massive order on an obscure ECN. For example: size on a stock is 2000x2000. All of a sudden someone jumps on BTRD or SIZE with 300K. Computers or other participants see this and get scared. Person pushes it until the market no longer responds, flattens his position, and trys pushing it back the other way. Quite annoying but I see it happen all the time.

One more thing to watch for regarding fake orders is what happens when someone crosses/locks the market. Does the size suddenly drop or does it stay relatively the same? If it drops and then comes back when the market is no longer crossed/locked then it's probably computers with fake size.

Steve is right. Learning level 2 takes many hours of screen time and what everyone sees is slightly different.
 
New York tape reading is pretty much dead now, and I thought level 2 reading was dead for a long while. Do you know anyone still making very good money with level 2??




I can still make a decent living reading the specialist tape reading will always be around it might change but its up to you to be the chameleon and as for nasdaq traders i know one level 2 trader making great money.
 
I did a half day workshop at the NYC Traders Expo with Fausto Pugliese of cybertradinguniversity.com. The title was Mirror the Dominant Market Maker. It covered a lot of how to read Level II, identify the axe, etc. It was very informative and has helped me somewhat, but as has already been said, it will take many, many hours before you can rely on it for consistent profits. I am not close yet to trading strictly off of reading Level II/T&S and currently only use it as a final check before executing an order.

I also read Financial Freedom Through Electronic Daytrading and the section describing Level II is pretty good, but very outdated The prices are in fractions and the spreads are mouth watering. It does give you an insight into how dramactically the market has changed in the last 5 - 10 years.
 
A mm will be on/near the bid when selling, and on/near the offer when buying. Its just like poker, trying to show weakness, while having bids or offers out on the boxes. I imagine things have not changed too drastically, but unless u are representing a very aggressive buyer or seller, level 2 to is for gaming you're intentions.
 
Quote from Gamer:

I have checked out Alan Rich and I am not convinced he makes the bulk of his income trading.
More...

I agree, I have read all of his threads on Trade2win, and while he does have some good entries, his executions always have the quantity erased. Why would you do that? Unless of course it's because his trades are for 5 shares. Can you say "Franz Shoars" :eek:
 
Quote from Triple X:

I agree, I have read all of his threads on Trade2win, and while he does have some good entries, his executions always have the quantity erased. Why would you do that? Unless of course it's because his trades are for 5 shares. Can you say "Franz Shoars" :eek:
More...

To be taken seriously, those so-called professional traders who sell seminars should post screenshots of their executions and P/L twice a day (one at the lunch hour and another at the end of the day) off the broker screen. Let them do this for a week and then I'll believe them.

Anybody can post brilliant hindsight trades.

I have learnt the hard way is that any so called pro trader who has a website selling seminars, promotes products, and keeps telling the world how great a trader he is without ever producing any evidence, is a failed trader.

Going back to the original topic, I have spent a significant amount of time every day watching and recording the chart/L2/T&S screens and since starting this thread and I have learnt a great deal. I am sure I will learn much more over the next months. I have also begun to read every single book on level 2 and T&S I can get my hands on (currently Rogan Labier, Jea YU, Chris Lewis).
 
Gamer:

I just wondered how you were progressing with your Level II journey of knowledge?

I'm thinking about pursuing a similar path and hoping it's a straight(ish) road?
 
You must log in or register to reply here.
Back
Top