Level2 Questions

[The General]

Hi,

Wondered if a couple of experts (perhaps Naz) could answer the following quick-fire Level2 questions plse ?

1) Has the minimum amt reqd to daytrade L2 changed (ie is it still 25k US or has the mini-brokerage account come into play (circa 10k US)) ?

2) Is ther a decent (ie fairly up-to-date) online intro available anywhere ?

3) What would be a good book to buy as an intro (Tony Oz perhaps) ?

All responses much appreciated !!

Cheers,

The General.

 

[The General]

Don't all answer at once then !?

 

[Naz]

It is still $25k to run an account however some brokers get around this rule by letting you trade under their company umbrella account and start trading from as little as $2000.There is a thread on t2w about this somewhere.

Many of the brokers will allow a demo of their product so that you can look at it and check it out.The best i think is directaccesselite.com

In my opinion most of the Nasdaq level 2 info in the books is out of date.Many still show things in fractions,something that was done away with two or three years ago.Level 2 Nasdaq evolves and probably the best way to learn it is on a course in the US or on the one that i run,details of which can be found on the home page of t2w.

In my honest opinion its best to get a trader to show you how he uses it and not Tom Dick or Harry.T,D,H will just give plain generalisations that any salesman would use in any advertising blurb.A trader shows you how to make it "sing" and do the things you need it to.

Anyone can pm me and i will gladly discuss it further in a phone call if they wish.Sorry it took a while to notice the thread,i've been busy trading the Nasdaq.

 

[The General]

Naz,

Thanks for that. Also, could you tell me what are the advantages (ie edge) in using Level 2 ?

I know that because you can see the orders, you know where you can get out in the reqd quantity. Getting out quickly can be achieved in any number of markets (eg FX).

So perhaps the advantage would be the opportunity of identifying and (once identified) following the axe ?

Cheers,

The General.

 

[Naz]

I take everything it does for granted now.Its only when i see someone trading a different way that i realise the difference.

I'm busy right now, when i've got a spare moment i'll try and post something worthwhile,rather than just rush an answer.

 

[tradertim]

General,

There`s a good section explaining Level 2 in Van Tharp & Brian June`s book "Financial Freedom through Electronic Day Trading". I also bought two of Tony Oz`s books (How to Take Money from Wall Street & The Stock Trader),but they don`t really explain Level 2 in any detail, rather they major on the chart patterns, support/resistance levels, proprietary scans, and money management techniques that he employs.

I did an online course with www.CyberTradingUniversity.com , which was reasonably priced and fairly thorough, albeit a little skewed towards the scalping end of daytrading. They also do a free taster session, so why not give it a go!

You only need a $25K account minimum if you are a "pattern day trader". Last time I looked this meant one who executes 4 or more round-trip day trades within a 5 day period, unless these daytrading activities do not constitute more than 6% of your total trading activity for the time period. A day trade is of course classed as one opened & closed on the same day. The advantage of a PDT account is that you have 4:1 buying power.

The advantage of Level 2 trading is gauging the balance of supply & demand, by watching both the position of market participants on the Level 2 screen, and the predominance of buyers/sellers & velocity of deals on the Time & Sales screen. The Axe(s) will of course do everything they can to fool you and take your money, so don`t just follow them blindly. They can & do trade using ECNs to disguise their actions.

 

[The General]

Thanks vm tradertim...i'll look into the online course.

The General.

 

[Naz]

In my opinion many brokerages are going to teach level 2 in a way that has traders scalping.Its in their interests.Many others will show it in a way that a salesman sells his goods.

In my opinion i learnt more about it it from how traders had adapted it to give their trading an edge.Put it together with t/a and see what is really happening to a chart pattern.

Here's what Chartman said when i showed it to him.

"He had slide shows of charts and the accompanying L2 screen to show the moves as they unfolded. When he says you see the move a minute before it happens on ANY chart is absolutely true. He knows what to look for, has his order in place, ready to hit the button..... This leaves no room for guesswork. Is it going to bounce? OR will it drop? He knows, while we're still guessing or gambling....."

Yes you can read the move before it happens,use different orders to capture the spread not pay it,manage the trade better.See what is really happening not what the chart likes you to think is happening.Exit the trades with better understanding.Use the direct access orders to your advantage.Trade and read momentum with skill.Of course you can also follow what the controlling market maker (the axe) is doing by colouring him in and watching his movements.Get instant fills.Know from looking at the liquidity on the screen if its the right stock to trade.Understand where your stops should truly be.Know if you should be taking the trade in the first palce,Track the market away from the action at different levels to understand whats happening there.Know when people are truly buying and that is not many times where the advertising blurb would lead you to think is the case and end up using it like a trader and not a marketing executive.