Level II Trading

When I see an lot of bids sitting there at support, and I am observing the market and I am looking straight at what is causing the bids to get that way, I am also seeing what is going to be happening next by DIRECT observation of the trading situation in terms of market trading activity trade by trade.




...... the only thing i can decipher here is that you are saying not to predict/hope but watch and react to 'as is' conditions. i agree





You said above: "If you could explicitly counter the notion that often firm bids lined up on Level II are meaningless,...." I cannot counter that statement of yours. Everything that I see and that you see has meaning.




.....if u see meaning in everything on wall street buddy, then let me wake u up, much of what we get from the media (and LevelII) is called.....what's that word..........'NOISE'... if u try to decipher all of it, u are not making trading simple for yourself





When I see firm bids lined up on level II I give them credance and I share gkadir's view that what he observes is coming next is going to happen and I know that at least three people (you, steve, and FS) are there opposite me losing money being opposite me as you said you are.




......have u ever heard of 'sitting on the sidelines and waiting for the next opportunity'???? who says either one of us would be doing anything in this situation







The market always follows the minority and this is a direct consequence of "market" orders being in control of the trading at the time that this occurs. This paragraph is applicable to both side of gkadir's comments. The minority always controls the market and whatever there is most of will not prevail.

I know I have to explain this to you in a couple of more ways and you will still fail to catch my drift.





...please do, it's not the minority or majority, it's the big orders that run the market





I do not trade the way you, Steve and FS do. I am in the markets to front run you, which I do. I speculate and do not bet. You all are betters and you play the odds.





.... let me fill u in, all speculating/ investing call it what u want in your timeframe, is betting. betting with high odds in your favor. if u think u can always be right in the market (since u're not betting), u just proved to me u know ish about trading
 
To be honest Grob, your opinions/critiques of me or my methods is not a major concern of mine. I do not take offense. I have made about 100k net for 2006 thus far so I am confident that I somewhat know what I speak of. Of course, yes, we could all make more money, and I want to get better dont get me wrong. But to tell me I am just plain wrong is mind boggling considering I am fairly profitable with my methods.


Quote from Grob109:

I'm sorry if my posting offended you , Steve That was not my intention.

I have a strong view of a person being on the wrong side of range breakouts, particularly ahead of the BO. I know that you definitely and strongly protect yourself when you are on the wrong side of any trade if it ever comes to that. I do likewise.

I am always glued to the DOM as my fine control. These days it is nearly always true that there are games of many sorts being played on it concurrently. Most can be pieced out as separate identifiable interwoven sequences and assessed for what they are.
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I have reviewed the thread. This is my intuitive take on the matter:

I would imagine the MM's observe if retail customers are on the other side of the trade, and have an ongoing calculation of their net positions, whether long or short, and when the difference is significant move the stock in their favor, while a % of the retail traders close out their positions quickly--adding to the panic and profiting the MM's.

Agree or disagree?
 
One more thought:

The only stock to choose for day trading is the type that you have a strong sense of the direction of the stock, so that you won't panic when/if it turns against you--then to average down if the trade has become "that much better" in your assessment.
 
I would agree that obvious size on the bid or offer is a contra-indication 80%+ of the time. I tend to fade the high or low of my time frame and pyramid my size up as the trade moves in my favor. I will only use Level 2 size to get into (or not get into) a position when I feel that the most recent move has become attentuated or that the pullback is over with anyway. A trader simply must be able to see the forest from the trees.

And, I never allow size to shake me off of a stock before I decide to take profit (Remember that part in Reminscences of a Stock Operator where the old man won't sell out for fear he'll lose his position?). Does this result in me giving some paper profit back? Sometimes, yes. But, I hang on for huge moves when I'm in full size. More often than not daytraders get shaken off by size and are left with no good risk/reward entries, so they either sit out the move or plunge in - get scared - hit out, hit back in, hit out, hit back in, and churn thier day away losing well in excess of what they would have lost were they on the wrong side of the entire move.

Frankly, I love seeing other daytraders get chopped up by such Level 2 and Open Book games - makes me feel much more convicted in my own style of trading.
 
Quote from Option Trader:

One more thought:

The only stock to choose for day trading is the type that you have a strong sense of the direction of the stock, so that you won't panic when/if it turns against you--then to average down if the trade has become "that much better" in your assessment.
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I completely disagree with both the substance and spirit of everything in this statement. Averaging down seems like magic to the novice trader. The real magic comes though when he gives his entire month back in a day.
 
Quote from FaderTrader:
I completely disagree with both the substance and spirit of everything in this statement. Averaging down seems like magic to the novice trader. The real magic comes though when he gives his entire month back in a day.
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Please read my statement again more carefully. I was not referring to unqualified averaging down.
 
Quote from Option Trader:

Please read my statement again more carefully. I was not referring to unqualified averaging down.
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Done. And I stand by my initial reaction. I don't average down, I pyramid winners.
 
Quote from gkadir:

Hello Fellow traders,

I wanted to ask your experiences in using Level 2 for trading stocks. I am trying to use it to reduce the risk at my entries, but I have find it very misleading sometimes.

We know that when there are a lot of Bids the price is likely to go up and if there is more orders on the offer the price is likely to go down.
I recorded the level 2 screen from my desktop. 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. Can anyone enlighten me with thier experiences why this is, and how and where I can learn to read the level 2 order book more effectivly.

Thank you in advance for your time.
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no one has mentioned time and sales screens...I thought they went well with l2 but I dont use either, so I dont really know anything about them.
 
It is my understanding that "retail" trades are a single digit per centage of the trading activity of the markets.

I really don't understand how a MM/trader that has an order to buy 500,000 shares of MSFT really has the time or inclination to waste with a guy from Elite Trader who has 300 shares of MSFT.

I have always believed that "small/retail/day traders are a "legend in their own mind" as to their importance in the overall volume of the daily market

SteveD
 
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