Wanted - Janet & John Guide To Level 2

[treefrogfarm]

I've just subscribed to level 2 data and despite reading all other posts/faqs I'm not really any the wiser.

I understand the screen layout but my very simple question (hence the reference to "Janet & John") is, as a rough rule of thumb and no commitments etc, how is the short term price movement "guessed" at given the level 2 data.

In the very simple world I live in, does it mean that if Sell Depth > Buy Depth, then short time price tends to go down?

Or, being simplistic again, is it the 'V' shaped graph that says if blue line is lower than red line, then short term price tends to go down?

I know that the ultimate answer is "it depends", but a rough rule of thumb would be really appreciated.

Thanks

 

[dcraig1]

In the very simple world I live in, does it mean that if Sell Depth > Buy Depth, then short time price tends to go down?
Thanks

No! It depends.

It probably also depends on whether you are talking stocks or futures.

Attached is a chart of a bit of todays SPI. 10 tick bars. Lower plot is smoothed ratio of total size on ask (5 levels) to total size in book (10 levels). Notice in an uptrending market, size is on the ask. Red line is 10EMA, Green line is 20EMA. You should also notice that there is a significant correlation with price - but not directly in the way you are thinking.

To understand this you must consider immediately marketable orders that do not show in the book. These are the players that are driving the market higher.

You also need to be asking if trades are occuring at the bid or the ask. It's all about supply and demand.

 

[CityTrader]

Seaq? Sets? Setsmm ??