So you’ve opened up a new brokerage account, funded it, and you think you are ready to trade. Wrong! If you are not trading with level 2 and real time charts you are putting yourself at a severe disadvantage.
Investopedia defines level 2 as, “A trading service consisting of real-time access to the quotations of individual market makers registered in every Nasdaq listed security, as well as market makers’ quotes in OTC Bulletin Board securities.” In laments terms it means you’re able to see the trades being executed right in front of you, in real time. Moreover, level 2 enables you to see various orders in on a certain stock.
For instance, say you pull up a quote of ABOT on yahoo finance and you see the bid is .044 and the ask is .045 then that is all you would know. Level 2, however, shows you if there is another bid @ .0435 or if there are 5 bidders at .044 and only one seller at .045, or vise versa. This can be helpful when determining if there are alot of certain buyers or sellers at one specific price on a stock. Two video recordings you must watch to get a really good feel for what we we’re talking about can be found here and here.
Real time charts show allows you to analyze volume and price action, which is key to be able to make good trading decisions. Again if you just look at a simple chart you will see a volume bar and a % gain or loss. Say a stock like AAPL moves from $380 to $390 on 10 million shares worth of volume, that would be all would you know. But with real time charts you could see where all that volume traded which is very important.
Say for instance more volume traded on AAPL at $380 than it did at $390 before the price rose, this would indicate there are more buyers on AAPL at $380 than there were at $390. There’s only one way you could see where that volume traded though and that’s with a real time chart. If you looked at a simple chart after the fact like this, you would just have to guess where all the volume traded. Real time charts allow you better determine support and resistance areas. Too illustrate out point further you must watch there video’s 1, 3, 6, 7, & 9 from our Trading University link.
If you’re wondering how to get level 2 and real time charts call your broker and ask them. Most brokers offer them for free or at a small cost but the benefits far outweigh whatever the cost may be.
Related Reading: Elray Gaming (ELRA) shows why level 2 is so important
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- NSRS real time video shows & explains level 2 manipulation
- ABOT live trading video lesson — analyzing level 2 in real time
- Stockhaven trades AAPL live in real time the morning after earnings
- Stockhaven Classroom 10/28/12 (How to prepare for a trading day the night before, Tips on using Level 2 to trade AAPL)
- Stockhaven.com — Real people, real testimonials