Level2, Time and Sales

R

rdlsmith

I understand the basics but I want to know more.

Things I would like to know:

-How to read if a stock is under buying / selling pressure. I can see T/S go green or red and I can see the bid and ask stacks but often those big orders on the bid or ask never make it to print. Or maybe they do and I just miss it.

-How to tell if a stock is too "thin" to get in and out of a trade. (Assume I'm trading 1k shares)

-How to tell when the "majors" are "playing games" by loading up both the bid and the ask.

-How to use L2 much like I would use charts to determine price direction.

-How to use L2 much like I would use charts to determine a good entry/exit for either shorts/longs. Especially the exit. I often get in right and get out wrong. Maybe a better understanding of time and sales along with L2 could help.

- (referring to bid/ask) How is the aggregate bid/ask information best used? On my platform it aggregates the top level bids/asks so you know right away how much is behind the bid / ask.

-On many stocks, everything changes so fast, how does one comprehend and make sense of the information overload to the extent it can be used.

Where can I find more information on Level II techniques and Time and Sales usage?



I like to play the Low of Day / High of Day. I day trade this strategy. I tend to trade stocks with a 5 day average volume over 500k and priced above 20 dollars.

One thing I've considered is a prop firm for the educational aspects of it. I don't really need the margin but I obviously could benefit from having access to other traders and educational materials. I have posted there and will follow up to that as it will be more detailed but I wanted to mention my thinking on the matter here as some may agree/disagree I can find the kind of education I seek at a prop firm.
 
Quote from icarus618:

Those are the secrets of the SOES bandits. Did you bump your head in '99 and just wake up?
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Dude, I'm just trying to learn. You didn't really make clear what you were trying to say.

Why don't you tell me all about how Level 2 and Time / Sales are no longer used by anyone. Or how the way I want to use them is no longer a good strategy or possible. Tell me how you think they are best used in day trading.
 
If you are looking for an edge you should probably look elsewhere now. Trying to read the tape has become nearly impossible. Whereas you used to be able to see real market makers and discern who was the axe in any stock, now it is all ECNs showing 100 shares. Or algos displaying orders only to cancel when the parameters don't fit - that is why you see all those huge orders in the book and wonder where they went.

If you want to go down this road (and I seriously would try to avoid this unless you want to scalp), watch one stock all day and make sure it is not a very thick stock. I would watch something that traded between $15-40 and less than 500k volume a day and more than 100k. Look for patterns, levels where orders step in, repeatable behavior by ecns.

And anything that trades more than 250k a day is probably thick enough for 1000 share lots these days - for most issues the slippage would rarely cost you more than $100, but know you stocks.

Go get em.
 
"-How to tell if a stock is too "thin" to get in and out of a trade. (Assume I'm trading 1k shares)"



Look at the level 2... take note of 2 things, how many shares are displayed, and how far apart are they. do an imaginary trade [paper trade] in the way of a market order for 1000 shares. and add up the prices you would have to pay for the shares... to approximate the stock's slippage...

Make sure you watch the stock for sometime before trading it... see it when it's calm and when its moving...

keep in mind that it's a lot harder to get rid of 1000 shares when things are looking bad [cause all the liquidity dries up - and slippage goes through the roof]
 
Quote from seasonedpro:

If you are looking for an edge you should probably look elsewhere now. Trying to read the tape has become nearly impossible. Whereas you used to be able to see real market makers and discern who was the axe in any stock, now it is all ECNs showing 100 shares. Or algos displaying orders only to cancel when the parameters don't fit - that is why you see all those huge orders in the book and wonder where they went.

If you want to go down this road (and I seriously would try to avoid this unless you want to scalp), watch one stock all day and make sure it is not a very thick stock. I would watch something that traded between $15-40 and less than 500k volume a day and more than 100k. Look for patterns, levels where orders step in, repeatable behavior by ecns.

And anything that trades more than 250k a day is probably thick enough for 1000 share lots these days - for most issues the slippage would rarely cost you more than $100, but know you stocks.

Go get em.
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Agree. Back when the Specialist was relevant, one could read the tape on NYSE stocks and take advantage when he would spread and print. No more, the game has changed.
 
seasonedpro:

and

Quote from thurstonhowell3:

Agree. Back when the Specialist was relevant, one could read the tape on NYSE stocks and take advantage when he would spread and print. No more, the game has changed.
More...


Guys..I agree that scalping is fading although it still works for me but not for long. Me profitability is diminishing. It will get even worse when more of these ROBOTS (automatic trading system) they are building hit the market. So, I am trying to learn other methods..any ideas. What is new? I read about some e.g. baskets, pairs trading, opening/closing etc...but which ones are the best & who teaches it? Am willing to pay for adv. Training/class with good 'new/current' strategies.
Thanks in advance
 
The key to your success lies in your willingness to find the trading style that best suits you. There are many paths to consistent profitability, but it would be foolish for me to call any one the "best". I would advise against spending lots of money on seminars, systems, teachers, etc. PM me for some book and website recos.
 
There is a lot of money that can be made from those tools (LII, prints) but it takes a good artist to interpret them. While some artists have natural talent all great artists got there by painting all the time and having an obsession with creating the image they saw in their mind. Bring the same mentality to stocks and keep discipline so you stay in the game through the learning curve and you can use the tools successfully as well. It's trading, not rocket science.
 
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