Market depth/Nasdaq level 2-3

T

tradingpoker

What is the point of this data when there are so many hidden orders?

Also, many day traders will have stop market orders which we can't see until they are hit!

So my question is, does anyone actually use/pay for Market depth or Nasdaq level 3 data?

If you do use the above please explain how it can be useful.

Thank you for your time and help
 
I haven't used L2 since early 2000s, right re too much hidden/fast HFT order flow for it to be useful nowadays.

I use the tape and 1-min candles
 
tradingpoker said:
What is the point of this data when there are so many hidden orders?
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What many people miss, imho, is that the fact that one can use hidden order but chooses not to is valuable info. Btw, while you can’t see hidden orders on the books, you can see trades on time and sales. As everything in trading, nothing is guaranteed to work all the time.

That being said, I am not paying for level2 because, besides unreasonable prices, I mostly trade liquid stocks where top of the books good enough.
 
qlai said:
What many people miss, imho, is that the fact that one can use hidden order but chooses not to is valuable info. Btw, while you can’t see hidden orders on the books, you can see trades on time and sales. As everything in trading, nothing is guaranteed to work all the time.

That being said, I am not paying for level2 because, besides unreasonable prices, I mostly trade liquid stocks where top of the books good enough.
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Do mind replying more on this: "the fact that one can use hidden order but chooses not to is valuable info."

But at this point it's too late right? "while you can’t see hidden orders on the books, you can see trades on time and sales."

What do you mean here? "where top of the books good enough"

Thank you very much!
 
I suggest you watch Jigsaw videos, they explain the dynamics. There are a few good videos by SMB on how the traders use level2 to time entries. Also watch MadAssMoney videos on the topic.

The main point, in my opinion, is that it’s true that the games are being played on Level2, but it’s a good thing for day traders. When someone puts a big order out, even though he could have hidden it or sent to dark pool, he is trying to “signal” something to the market. Your mission is to figure out what, if anything, he is signaling and why. For example, he may put out a large order on the offer saying - “Not so fast, I haven’t got all my shares at lower prices yet, so I can’t let you take the stock higher yet” Once he removes it - “OK, I have my full position, let’s take this sucker higher!”

Regarding hidden orders. Let’s say the bid is 9.99 with 1000 shares displayed. But then you look at TnS and to see 500, 500, 200, 100, 500 shares traded but the bid still showing 1000 shares. Obviously there’s more shares available than displayed.

When you pay for Level1 data, you see best bid and offer from each market center (Nyse, Nadq, Edgx, etc). So if there’s big size on top of the books, you will see it. But what if big size is just below the best bid/ask? You will not see without Level2 subscription.

IMO, the more liquid the instrument, the less Level2 is relevant. The less liquid the instrument, the less HFT participation in it and the more “signaling” is done via Level2 by larger manual traders.
 
qlai said:
I suggest you watch Jigsaw videos, they explain the dynamics. There are a few good videos by SMB on how the traders use level2 to time entries. Also watch MadAssMoney videos on the topic.

The main point, in my opinion, is that it’s true that the games are being played on Level2, but it’s a good thing for day traders. When someone puts a big order out, even though he could have hidden it or sent to dark pool, he is trying to “signal” something to the market. Your mission is to figure out what, if anything, he is signaling and why. For example, he may put out a large order on the offer saying - “Not so fast, I haven’t got all my shares at lower prices yet, so I can’t let you take the stock higher yet” Once he removes it - “OK, I have my full position, let’s take this sucker higher!”

Regarding hidden orders. Let’s say the bid is 9.99 with 1000 shares displayed. But then you look at TnS and to see 500, 500, 200, 100, 500 shares traded but the bid still showing 1000 shares. Obviously there’s more shares available than displayed.

When you pay for Level1 data, you see best bid and offer from each market center (Nyse, Nadq, Edgx, etc). So if there’s big size on top of the books, you will see it. But what if big size is just below the best bid/ask? You will not see without Level2 subscription.

IMO, the more liquid the instrument, the less Level2 is relevant. The less liquid the instrument, the less HFT participation in it and the more “signaling” is done via Level2 by larger manual traders.
More...


Thank you very much
 
personally L2 helps me to identify momentum of market you can see how strong movement is. Also you can have ruth idea with price levels will be protected there the price bounce back.

Like others told it helps you to time your entry/exit better. Its really depends on your training style if you planing to keep position for day or less i would say its must have things. For longer period of time not that much.

Hidden orders etc... wouldn't bother and i think you shouldn't be bother that mush too. some brokers operate outside market find buyers and sellers do negotiations for price and fill docs this stuff happens all the time. This is part of the risk but what was said i wouldn't say someone will buy chunk of stocks below market price or high above.
 
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