Trading Nasdaq Stocks - scary or what ?

[Naz]

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.

 

[Mr. Charts]

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]

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]

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