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Stockaddict

How Useful is Level II?

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During the early days of Level 2, traders were able to find edges and step in front of the market makers and profit from this.

 

Level II is full of manipulation and market maker games. Market makers will hide size, step off the bid/ask, etc.. to fake traders into making mistakes.

 

Does Level II allow a trader to gain an edge? Or are traders better off trading without it?

 

Thanks

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If you are a real "player" in the market, you need to have access to as much information as possible, and try and stay one step ahead of the game.

 

With this in mind I would say that Level II is essential. Even if you only make one extra successful trade because of this, it will pay for itself.

 

While there are many "free" live pricing facilities around, Level II does give you that extra edge.

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Im not sure how anyone can really call themselves a trader without at least access to Level II.

 

While I appreciate saving money may be a factor when starting to trade, you really cannot afford not to have level II. Level II gives you a better feel for what is actually happening underneath the surface, with more detailed quote, size info.

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Yes dctrader ... if you ever want to see this happen then watch the Hang Seng Futures in action (HSI on IB, free data). Its a master class in manipulation but extremely tradable once you get past that.

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Are there any technical books out there that teach you about the different tactics market makers use?

 

I'm familiar with the NASDAQ Level II Market Maker traps using false size, and inet book traps, but that's about it

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How useful is Level II for more thinly traded stocks?

 

I'm specifically referring to TSX. Is it more reliable there (due to the smaller market) or is it more suseptible to head games?

 

Thanks for the help

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In my limited experience with L2 data it was more noise than anything.

And when it was legit you should already know where support is from the chart.

Time and sales is not as full of noise since it's legit transactions going through, though there can be games here as well for sure.

 

JMHO

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I wouldn't base purchases on what somebody is advertising, it could be misleading. Same with L2, your guess is as good as anyone else' in MM's intentions in the market. T&S is better a gauge. In thin markets, don't even bother with L2. You're playing their game and their rules.

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I don't understand how with the advent of Iceberg and Hidden orders that level II could be viable....it's just not accurate information you are dealing with.

 

 

There's been fourth market trading for years as well. Level 2 at least will give you a hint at where the dumb money is going, and total view gives total anonymous interest. I have found it quite useful.

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I couldn't trade without it.

I use a combo of charts, then level 2 and T&S. There are several fakes the MMs play and that means that maybe 90% of the time they are of no real use.

However, 10% of the time level 2 and T&S tell you what is going to happen before a chart tells you anything. Sorting that 10% out is what makes level 2 and T&S priceless. You require the skills to read them or make intelligent guesses as to what is going on. I guess the nearest thing is reading the road ahead and anticipating when you're driving.

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