Level II Trading

and when i say reverse, i dont mean the trend necessarily changes but a pullback or squeeze may occur. To a longer time framed trader this may not matter much but to a person whose window is 5 minutes or less it matters a great deal.


Quote from Grob109:

You arewrong on this level as well.
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I was there in a trading room in the late nineties through the change to decimalization, etc. Used watcher platform which does not highlight time and sales, and saw many traders make huge money trading off of nothing but level 2. Over several years these same traders gradually were not able to make a dime. I think the conclusion was that the bids and offers became less and less credible as market makers were seeking to regain/increase their edge. They became more and more deceptive in their practices. Just ..my...opinion.
 
Quote from Grob109:

gkadir sterts the thread with:

"I found to my surprise on many ocasions that when at critical support or resistence level, despite there being more orders on the bid, the price goes down vice versa when the price is at major resistence.

Its like if there is more orders on the bid the price goes down. If there's more orders on the offer the price goes up.

I am really confused."

He gets this response from Tvardek:


"This is false. Visible bids and visible offers dont necessarily mean that the stock price will move in the anticipated direction."

then we read:

"Steve, Thanks for the correction."

Steve amplifies his understanding of his position that is contrary to gkadir by saying:


"This is a very common tactic, hell I use it quite often too. I see specs/floor traders work orders like this all the time. It takes a trained eye to know when a bid is real or when its just there to temporarily move the market in one direction to get daytraders to fill them on the opposite side. Its really a true art when done right."


Two months pass... and we hear from FS.

"....it is my understanding that Level II became semi-useless once it was released to the open public. it is now just another pump-and-dump brought to you by the wall street promotional machine (like Steve said, it can almost serve now as a contrarian indicator) if i'm wrong about this, please let me know."

March came and went then a May post arrives.

So the thread initially died because two people more or less reached a mythical agreement. The myth prevailed and two months later the myth is substantiated and a little tweak is added: ....if i'm wrong about this, please let me know.

Steve tells gkadir he is wrong and this is because of the "anticipated direction" Steve bases his "you are wrong" upon. The confirmation of the same view by FS is borne out with the comment: "it can almost serve now as a contrarian indicator"

FS you are wrong. So is your buddy Steve.

I regard gkadir as a person who is "seeking" He simply is making a comment that is his analysis of many observations that are consistent.

My response to this group of people is one made before that drew a comment: "Jack started to tell us a story but never finished it". I did finish and it was not understood. That is par for the course re: me and my comments.

Why did gkadir draw the right conclusions and say he was confused and why did Steve and FS get caught in the trap of this market myth?

They did it all for the same reason.

This myth of the markets could be named the democracy myth. Or the voter's myth.

Steve, FS and gkadir are all playing the numbers game as usual. The market is following the rules of the market game. The two activities are the opposite of each other.

If you believe the myth that people promulgate, you get to not make much money. If you obey the market's rules and ways you get to make as much money as is offered when you become effective and efficient.

gkadir is gradually moving away from the reality of what the market actually does to the places where Steve and FS are sitting being wrong as a consequence of using the mythical party line.

Why cannot gkadir go through the process of figuring out what is going on?

Why do Steve and FS embellish their misunderstandings with "stories"?

The tree for learning about the market's operations has many branches most of which head out to Myths at their ends. A person out there can fall off after a while and go climb the tree again and not get stuck sitting on the mythical branch.

Why do Steve and FS sit on the branch and talk to a person on the trunk asking questions? They "know" the myth. They are teaching it to others.

In a democracy the majority rule. We all know this and Steve and FS "anticipate" the majority ruling or from the "contrarian" view think the opposite. Both are the same view.

What if gkadir had just posed his two concerns in another way? Other than the "democracy" orientation? I mean he did come up with two concerns that covered both directions of the market and he made the correct observations of the consequences of the concerns. Man, this is thinking and being rational at its best but he actually caved when a myth was presentede to him by someone sitting way out on the branch of a tree.

A lot of people climbing the tree go to the branches and sit around the myths.

The query:

At critical support,

If there are more orders on the bids, then the market goes down.

Or at critical resistance,

If there are more orders on the offer, then the market goes up.

Trading at the limits of the range is being described. A lot of people want to buy at support it looks like. It looks like a lot of people want to sell at resistance.

This is the admonition to buy low/sell high being monitored by gkadir.

Who controls the market at Support?


Who controls the market at Resistance?

Are any of these people showing on the level 2 or DOM?

How could they be??

The lesson learned at a given height on the trunk of the learning tree that enables you to climb higher instead of going and sitting on a branch.

By reasoning through to being able to see what is going on, you often get to see how the market works.

[color=blueSo where does gkadir go to observe what he has not seen so far?[/color]

Cool. As he sees this going on, his questions that arose by looking at level II are answered and he is ready to proceed with his next challenges to become more effective and efficient.

What about all the people in the branches sitting in mythville?

That is a tough situation for most people. A person sitting on a branch is stuck as far as learning to make more money faster. That takes recognizing that thecequity curve is stuck at the same slope and the slope is less than the slope of what the market is offering.

What do people way up the tree make?

What do they know? One thing they know regarding the myth presented by other in this thread is that the myth does not work. What proves it does not work is gkadirs observations that started the thread. Those, observations are not a sufficient proof, however. The additional observations at the place where they occur are what allows for a disertation on debunking the myth.

Here come the flamers....lol.......
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THANKS, WHAT ARE U SOME KIND OF A POET TURNED TRADER?
 
Quote from Steve Tvardek:

This is false. Visible bids and visible offers dont necessarily mean that the stock price will move in the anticipated direction. If it were as easy as you explained it, everyone would be super rich, there would be no skill involved in trading. The key is to understand if these bids represent passive buyers or aggressive buyers and vice versa. Are these bids there to push the stock up or be taken out by sellers propelling the stock lower? Figure this out consistently and you'll make a nice income.
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this is true...you just need to know which market this is true in..

while it may not be true where you trade it is certainly true where ive been saying for quite some time...peace
 
Quote from fhl:

I was there in a trading room in the late nineties through the change to decimalization, etc. Used watcher platform which does not highlight time and sales, and saw many traders make huge money trading off of nothing but level 2. Over several years these same traders gradually were not able to make a dime. I think the conclusion was that the bids and offers became less and less credible as market makers were seeking to regain/increase their edge. They became more and more deceptive in their practices. Just ..my...opinion.
More...

ahhh the good ole days...WATCHER :D
 
Quote from flipperskipper:

THANKS, WHAT ARE U SOME KIND OF A POET TURNED TRADER?
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No.

Generally, I do write in other fields; this is just a place to make money.
 
Quote from Steve Tvardek:

do explain then.
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I think I'll wait a day or so.

In ET there is rarely a thread that has a start like this one did.

There may be some people who made the same observations and want to stay on their exploratory track by following through on the four questions that I raised.

Also there are some killer myths out there and this is one to avoid. If a person hasn't fallen into it and is at inquiry, then it is a good idea to just bypass the myth by working all the way around it.

My answer to you will be in the orientation of gkadir and not an "all over the lot" application of a myth.

It is a fundamental requirement to understand how market trading works. What I mean is, is that there are some very deep and profound comprehensive expositions on how the markets are scoped and bounded and a person has to have their content down cold.

From a page 3 of one of them:

"This book is about trading, the people who tradesecurities and contracts, the marketplaces where they trade, and the rules governing trading........Market micro structure is the branch of financial economics that investigates trading and the organization of markets......You will learn how prices come to reflect information about fundamental values, who makes markets liquid, and why some traders consistently profit from trading while others lose. You will be able to predict how various trading rules affect price efficiency, liquidity and trading profits."

Making money is all about three things: investing, speculating and gambling. Investing is about moving money to the right place at the right time; speculating is using information for better returns; and gambling is focusing on favorable outcomes compared to unfavorable outcomes.

Investors speculate without thinking....speculators gamble without considering , etc..

All people do all three simply because of how they have equipped themselves. gkadir may become an "informed" trader someday. That is he will have avoided the myths of the market.

So this thread is about being informed.

"Markets provide many valuable opportunities. To take advantage of them , you must first recognize them." From Chapter 8 of the same treatise*.

This market condition that gkadir correctly recognizes can be buttressed by looking concurrently at a place that demos what is behind the level II observations.

The informed trader is a subgroup of speculators.

Getting right down to where the rubber meets the road, the thread subject is anticipation and front running the unfolding opportunity. This is not your bag as a consequence of your orientation and beliefs. But it may be for gkadir if he gets informed by monitoring further and keeping his reasoning very cool. I am forwarding that opportunity for him at this point.

He is arriving on the scene and you are sitting on a mythical branch below the opportunity.

*See Trading and Exchanges by Larry Harris.
 
I must admit, I find your writing style impenetrable. I also see no refutation of Steve's statements, with which I agree, just somewhat vague assertions that it is a myth and he is sitting on a branch.

If you could explicitly counter the notion that often firm bids lined up on Level II are meaningless, and that they can even be considered contrary indications, you would be saying something of more substance relevant to the question at hand.

Those of us who trade off of Level II tend to require a full picture of the action, rather than focusing on the bids/offers alone. This includes pulled bids/offers, quick spreads, changing size, how the ECNs behave around the spread, and especially the size and direction of prints, in conjunction with technical analysis: chart patterns, levels, pivot points, etc.
 
Amen!

I too find his writing style overly complicated. All I took from his post was the direct insult :D.

Until he can actually make an arguement against what I posted (instead of just saying I'm wrong), I'll pay him no mind.

Quote from Dogballoon:

I must admit, I find your writing style impenetrable. I also see no refutation of Steve's statements, with which I agree, just somewhat vague assertions that it is a myth and he is sitting on a branch.

If you could explicitly counter the notion that often firm bids lined up on Level II are meaningless, and that they can even be considered contrary indications, you would be saying something of more substance relevant to the question at hand.

Those of us who trade off of Level II tend to require a full picture of the action, rather than focusing on the bids/offers alone. This includes pulled bids/offers, quick spreads, changing size, how the ECNs behave around the spread, and especially the size and direction of prints, in conjunction with technical analysis: chart patterns, levels, pivot points, etc.
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