Trading Nasdaq Stocks - scary or what ?

stevet

Established member
917 5
the reason it moves a lot is that no one knows what its gonna do - and therefore the participants are running stocks up and down - but as you look more closely at the price action - i promise it will start to make sense - and you will see that there are key entry and exit points - and the real noise is in the bits where no one knows - just watch the bid and ask price and volume for the all the data you need - level 2 was designed to lead you up the wrong path - and you just dont need it - but only trade the real liquid stocks
 

Naz

Experienced member
1,391 24
Stevet is right about the noise,being the part where no one knows and its important to be able to filter this out in ones mind.

In recent years i've always added chart patterns to my level 2 trading.Remember the t/a and level 2 thread a while back.

I play things very similar to Mr Charts,with the gappers,news stories, core stocks etc but then i add fibonacci and level 2 more.

All my big set ups come from how i read the chart patterns. These could be traded with an ib account and never look at a level 2 screen.

However i add the edge of level 2.In the morning SINA move yesterday it was the way the axe played the stock on the level 2 screen that gave the signs for the move along with the chart pattern.All i did was shadow the axe.

When it was running my stop was right behind him.
When he started to get nervous and undecided i was out.

Was i getting freeked out by all the noise going on,no i was blind to it,I knew man who would lead me and i let him show me on the level 2 screen.

The move is on the October US equity trading thread.
 
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Trader333

Moderator
8,655 981
Naz,

All my big set ups come from how i read the chart patterns. These could be traded with an ib account and never look at a level 2 screen.

I can hardly believe you have said this and in my view anyone who was to trade any chart pattern without the aid of level II is substantially increasing their risk. I know you go on to say that Level II improves things but I simply wouldnt trade without it.

For me there have been numerous occasions when a chart pattern gave a great setup and the bid ask spread was only 1 point and I was looking to go long. But one look at the level II screen showed that there was a gap of 15 points or more from the inside bid to the next price level. This cannot be seen without Level II and has prevented me from taking a position that would then have had an immediate 15 point or more loss.

My first trading priority has always been how do I reduce my risk in any trade I make and I have found that Level II helps me enormously in this area.

I accept that trades can be made without the aid of level II but for me that is engaging in an unnecessary level of risk taking, others may disagree which is fine as we are all entitled to our views.


Paul
 

Grey1

Senior member
2,186 178
Paul,

Quote "My first trading priority has always been how do I reduce my risk in any trade I make and I have found that Level II helps me enormously in this area.

I accept that trades can be made without the aid of level II but for me that is engaging in an unnecessary level of risk taking, others may disagree which is fine as we are all entitled to our views. "



An excellent comment... I hope our fellow traders read this comment more than once...

Stevet

Quote " level 2 was designed to lead you up the wrong path .

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20940


Despite all comments in the link above I still use it just to reduce risk of entry .. and that is all..

If you are interested in L2 trading , you can try paltalk's trading room . There are few very proficient L2 Players... Their calls on entry is good but can hardly get the exit and market direction right..
 

Naz

Experienced member
1,391 24
Hi Paul,

You know that i look for a chart pattern and then zoom into my level 2 screen.That is the way that i believe it should be traded.

However the thread is Nasdaq stocks-scary or what.

So rather bury my head in the clouds and think that everyone is a fully paid up memember of the level 2 traders club.I hope i'm sensible enough to realise that lots of people trade at different levels.You are very proffessional in what you do and i admire your level 2 skills.

However there are lots of beginners out there and they need to understand that there are gentler ways of trading Nasdaq stocks if they so wish.That is why i mentioned the charting ib route.You know as well that after a while most Nasdaq ib chart traders end up watching level 2 screens.
 

Naz

Experienced member
1,391 24
Now i'll put my trading hat on.

Someone like Trader333,is a very good level 2 trader,who understands the benefits it gives.However negative thoughts always seem to come in the trading world from people who dont tend to use or understand it correctly.

The Nasdaq is an electronic market that exists on a level 2 screen.Moves evolve there,the underlying market can be seen there,only when someone transacts against a price that is shown there does it appear on a chart.

So viewing it at important times gives a trader a slight window on the market before it happens.Of course this is just my opinion.
 
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Mr. Charts

Legendary member
7,370 1,194
I agree with both Naz and Paul here.
What is often crucial but frequently overlooked is time frame.
On fast one minute and/or level 2 trading, my experience is that those two elements are beneficial in obtaining the maximum information possible.
However, on a larger time frame, five minute bar trading, level 2 is not strictly necessary, though useful. It really depends on how you trade. Certainly depth of market knowledge is vital in the scenario Paul described. Again that is dependent on the liquidity of the share and the time of day. For example a China stock early in the trading day requires level 2 and other factors before opening a trade, not to mention titanium b**ls. Later in the day, I personally have found level 2 less essential on those stocks and trading less frenetic because there is good depth and much tighter spreads for safer exits.
There are however very many stocks where once the day is running there is plenty of liquidity and one doesn't have to worry too much about having someone to transact against at a reasonable price level.
 

timsk

Legendary member
7,598 2,374
Naz, Mr. C. Grey1 & Trader 333,
At the risk of sounding sycophantic, it's fantastic to get inside your respective minds via your contribution to this excellent thread and, of course, the many others threads that you all post on. Very insightful, and the sort of thing that kindergarten traders like myself just won't get from any other source. Thank you one and all - and please keep it up!
Tim.
 

stevet

Established member
917 5
ok - level 2 - some off the wall thoughts - firstly it takes fractions of time to pull and add size at any price level

but how about this - do you realise how much bandwidth level 2 takes up - and its a real issue as it is really slowing down your computer system and by extension your reaction time

and so many elements come in to level 2 - from all the different participants in the market who all have different reasons for being there

i will use level 2 to check illiquidity in a stock, but then i just trade it a different way if it is illiquid
 
 
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