Decent Level 2 book?

[SanMiguel]

I was looking at using level 2 to trade some small cap shares.
Firstly, are there any books out there that cover any level 2 stuff?
Secondly, the main thing I'd be looking for when wanting to get into a small cap is to see that there wasn't a big seller in the way - is it as simple as just looking at the offer sizes in the Level 2 screen? Does it give any indication as to the code of the seller or would I compare volume/share size amounts with all the other sellers? For example, someone offloading thousands of shares whereas all the other sellers/buyers are a few hundred shares each...

Also, what's the best platform to use? Only ones I know of are IG allowing margin, and Money AM, not allowing margin but can trade smaller market cap shares presumably.

 

[Jaydee]

Secondly, the main thing I'd be looking for when wanting to get into a small cap is to see that there wasn't a big seller in the way - is it as simple as just looking at the offer sizes in the Level 2 screen?

The big seller you describe may be a spoof order or a market maker trying to hold down the stock while he gets a large block buy order done OTC. Also, you may have dark pool orders sat inbetween the bid/offer spread or icebergs making you think that there is less volume to be done than there really is. It really isn't simple...

 

[SanMiguel]

The big seller you describe may be a spoof order or a market maker trying to hold down the stock while he gets a large block buy order done OTC. Also, you may have dark pool orders sat inbetween the bid/offer spread or icebergs making you think that there is less volume to be done than there really is. It really isn't simple...

Less likely with a small cap isn;t it than perhaps a stock like VOD or other FTSE stocks?

 

[Jaydee]

Not at all - more likely in fact. The less liquid something is, the more difficult it is for large institutions to buy/sell large amounts without moving the price. Therefore, you will find a lot of the above in these stocks, particulary market makers holding down/up prices for a period of time while they try to work the other side. Darkpools are on the increase now too

 

[SanMiguel]

To hold down a stock, they'd have to be filling their sell orders though wouldn't they?
...or the sell orders preventing anyone else from buying as it scares them off but in the meantime their own buys would be raising the price.

 

[Jaydee]

To hold down a stock, they'd have to be filling their sell orders though wouldn't they?
...or the sell orders preventing anyone else from buying as it scares them off but in the meantime their own buys would be raising the price.

The large sell order (offer) would be designed to scare people from buying, as you said. It is obviously not without its risks though.

The large buy order would be done off book while the market is 'held down' - they would go out to find a block seller (say 20 times NMS) and arrange a deal. They would then cancel their offer once the trade had been completed.

 

[Chartsy]

mate i've got this massive pdf on daytrading level 2, like a hundred pages, pm me for details