Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

dtsb

Is Level 2 Data Still Worth It?

Recommended Posts

I have been reading some mixed information about level 2 data recently and was wondering if it was still as important for day trading as it seemed to be a couple of years ago?

 

From my reading I have gathered that around the mid 1990s there were strategies for people to trade based on level 2 data because most people didn't have it at the time. Then as the year 2000 came around those strategies became obsolete because more and more people were able to access real time level 2 data but it was still a necessity for NASDAQ day trading because it would show you where the big institutions were headed. Fast forward to the present and I am reading articles that give conflicting advice toward level 2. Some say it is still a necessity and some say because of the strategies of the bigger institutions to mask their orders level 2 is useless nowadays.

 

As someone just starting out all this conflicting data is a little confusing to me and I was wondering if anyone could chime in that day trades NASDAQ and tell me their opinion.

Share this post


Link to post
Share on other sites

If you are talking about stocks then Level II was great until decimalisation where any real advantage to trade between the Bid and Ask disappeared. I used to use it extensively but soon learned that it was only of real use to reduce risk specifically at market entry. The strategies I now use are not dependent on that any more and as such I don't use it at all now. Most of the people I know who used it have now moved away from it.

 

 

Paul

Share this post


Link to post
Share on other sites

I think its started in the late 80's but there was a wrinkle in order placing on the NASDAQ that utilised the Small Order Execution System (SOES). Essentially it was a system to preference the small lot (under 1000 from memory trader). It let you scalp with guaranteed fills. This lead to a bunch of traders they called "SOES Badndits". This was what spawned all the L2 'methods'. After the advantage to small lot traders was eliminated and ECN's proliferated (particularly those that allowed large traders to 'hide' there orders better) I think the advantage of using L2 was largely eroded. That's just my opinion though.

Share this post


Link to post
Share on other sites

Cool information Blowfish...

The only thing I can really see with the book that seems usefull is accumulated depth of market, just to make sure your not entering in on the wrong side of a stacked book. I haven't done much there but I would think because of liquidity its part of the markets nature to trade to size at that level.

Even there though, I don't think we are fast enough at this level to deal with the book using anything other than tape reading techniques on the DOM. Even then, thats a whole lot of information/patterns to have to train your brain on and might do more harm than good for a very long time.

Share this post


Link to post
Share on other sites

Depth of market isn't what you think... even with tradestation I can make a 50,000 share order look like 500 shares.

Agree tape reading and smaller time frames (tick) are much more valuable.

Share this post


Link to post
Share on other sites
Depth of market isn't what you think... even with tradestation I can make a 50,000 share order look like 500 shares.

Agree tape reading and smaller time frames (tick) are much more valuable.

 

Actually, could you explain how you would do this? I don't quite understand the mechanics of how that would be possible. While I mostly sit in the camp that the order book should be treated as noise and ignored there is an interesting thread on elite trader about accumulating all 5 levels of the DOM on each side, building an indicator from it and using it for entry.

While it wouldn't be the meat of the trade or occur all the time I would think there would be some utility at a certain level of imbalance as far as getting better trade location on entry or picking up a few ticks at the exit.

Share this post


Link to post
Share on other sites

Its just a box on the order bar that says "show only" you can enter 666 if you like.

 

What you are talking about is far more complex, probably possible, possibly useful. Just observing the relative motion (or looking at the changes in bid/ask levels by the "tick") would be valuable, but the actual size of buyers/sellers is inevitably hidden.

 

Market profile will give you the most info in this respect, my opinion.

Share this post


Link to post
Share on other sites
I have been reading some mixed information about level 2 data recently and was wondering if it was still as important for day trading as it seemed to be a couple of years ago?

 

From my reading I have gathered that around the mid 1990s there were strategies for people to trade based on level 2 data because most people didn't have it at the time. Then as the year 2000 came around those strategies became obsolete because more and more people were able to access real time level 2 data but it was still a necessity for NASDAQ day trading because it would show you where the big institutions were headed. Fast forward to the present and I am reading articles that give conflicting advice toward level 2. Some say it is still a necessity and some say because of the strategies of the bigger institutions to mask their orders level 2 is useless nowadays.

 

As someone just starting out all this conflicting data is a little confusing to me and I was wondering if anyone could chime in that day trades NASDAQ and tell me their opinion.

 

Level 2 is still worth its weight in showing the games being played although the T&S gives the best window into supply and demand.

 

Most games comply with supply and demand on the tape. It is very useful when looking for an entry. The flipper got his name from playing these games on the DOM in favor of the overall S/D.

 

Good Luck

 

Advice:

 

Look at the T4 or TT DOM to get the both the level 2 and time and sales data, this way you see the full picture:)

Share this post


Link to post
Share on other sites
What do you mean when you said look at the T4 or TT DOM?

 

T4 by CTS and Trading Technologies Depth of Market Platforms. Both of these vendors offer great D.O.M. that show T&S on the DOM.

Share this post


Link to post
Share on other sites
Unfortunately TT DOM does not show sub-second T&S data. Very old releases showed them.

 

The edge with these DOMs is far greater than without, most break up the orders or do not show the T/S at all. If you need to see the HF trades I would recommend having it programmed and running it along side your DOM's, works pretty good.

Share this post


Link to post
Share on other sites
The edge with these DOMs is far greater than without, most break up the orders or do not show the T/S at all. If you need to see the HF trades I would recommend having it programmed and running it along side your DOM's, works pretty good.

 

"or do not show the T/S at all"

Hidden orders? You meant block trades?

Share this post


Link to post
Share on other sites
"or do not show the T/S at all"

Hidden orders? You meant block trades?

 

When I said they don't show it at all I meant they only show the quotes and nothing about time and sales. Others only show a 1 or a 2 by the traded price level as the transacted amount is broken down into ones and 2s (ninja trader)

Share this post


Link to post
Share on other sites

If you are a fast scalper then L2 data may help, i know of some traders who trade stocks only looking at the L2 data and not even the charts for quick scalps..its not of any use to swing and position traders..

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • EURUSD Is Dominated By The Bull Market Throughout As The Pair Seek To Recover EURUSD Price Analysis – November 18 The bulls had full control today, moving the market up during the entire European session as the FX pair confirmed its breakout past the high of the prior session after trading up to 1.1068 above during the day. Key Levels Resistance Levels: 1.1501, 1.1412, 1.1278 Support Levels: 1.0989, 1.0879, 1.0780 EURUSD Long term Trend: Bearish EURUSD at the moment, the rebound from the 1.0879 level is initially seen as a remedy and, in the case of a further increase, the increase may be contained by the level at 1.1412 retracements from the level at 1.0879. Although the downward trend from the 1.1501 (high) level may resume later. However, the sustained plunge from the 1.1412 level may change this bearish position and lead to a greater increase in the retracement to the level at 1.1501. EURUSD Short term Trend: Ranging The EURUSD intraday bias stays neutral for the initial position and a further plunge is anticipated as long as the resistance remains at the level at 1.1073. Also, the corrective rebound from the level at 1.0879 is expected to end at 1.1501. Meanwhile, past the low of the level at 1.0989, the bias will be revised downward to repeat the low of the level at 1.0879. However, the breakout of the level at 1.1073 may soften this bearish trend and push up the bias for the level at 1.1175. Instrument: EURUSD Order: Buy Entry price: 1.1073 Stop: 1.0989 Target: 1.1412 Source: https://learn2.trade 
    • 0X (ZRX) Continues To Disappoint Investors Key Resistance levels: $0.30, $0.35, $0.40 Key Support Levels: $0.20, $0.15,$0.10 ZRX/USD Price Long-term Trend: Bearish The ZRX/USD pair is in a downward move after the market retests the $0.30 price level. In October, the coin was in a bullish move and tested the $0.35 resistance level. The bulls tested the $0.35 price level again and formed a bearish double top. With the formation of the bearish double top, the coin fell to the support line of the channel. The bulls may a retest at the $0.30 price level and resumed the downward move. The market has fallen to a low of $0.27 and it is consolidating above that level. This was the previous low in May. However, if the price breaks below $0.27, the pair will drop to a low at $0.20. Nevertheless, if the $0.27 support holds, the price will move up. Daily Chart Indicators Reading: The price has fallen to the support of the 50-day SMA and if the 50-day SMA holds, the 0x will move up to retest the resistance level. The RSI period 14 level44 indicates that the price is in the range-bound zone. ZRX/USD Medium-term bias: Ranging The bulls move up to test the resistance at $0.35 on two occasions and commenced a sideways move. The coin is fluctuating between the levels of $0.27 and $0.35. Nevertheless, the bears tested the support line and rebounded. The pair is likely to continue with the sideways move. 4-hour Chart Indicators Reading The 21-day SMA and 50-day SMA are trending horizontally indicating that price is in a sideways move. The stochastic indicator is above the 40% range indicating that price is in bullish momentum. General Outlook for 0x The ZRX/USD pair is in a downward move but the price is ranging above the $0.27 support level. After the sideways move above $0.27 and if the bears break below the support level, the selling pressure will resume. 0x Trade Signal Instrument: ZRXUSD Order: Buy Limit Entry price: $0.25 Stop: $0.20 Target: $0.35 Source: https://learn2.trade 
    • Read about Spectre.ai New asset class EPIC – Make 90% Every 1 Second!Low Minimum Deposit - https://binaryoptionsnodeposit.com/spectre-ai-new-asset-class-epic-make-90-every-1-second/
    • Date : 18th November 2019. Events to Look Out For Next Week 18th November 2019.Welcome to our weekly agenda, our briefing on all the key financial events globally. The week ahead is expected to reveal a healthy housing sector in the US, while Canadian data could clear the way for BoC. Eurozone’s PMI are also on tab.Monday – 18 November 2019 ECB Financial Stability Review (EUR, GMT 09:00) – The Financial Stability Review provides an overview of potential risks to financial stability in the Euro Area. Tuesday – 19 November 2019 Monetary Policy Meeting Minutes (AUD, GMT 00:30) – The RBA minutes, similar to the ECB Reports, provide a detailed assessment of the bank’s most recent policy-setting meeting, containing in-depth insights into the economic conditions that influenced the rate decision. They are usually a cause for FX turbulence. Housing starts and Building Permits (USD, GMT 13:30) – The September decline in starts reflected weakness in multi-family components, mainly led in the Northeast and Midwest, alongside small declines in the south and west. Permits have shown a solid growth path through Q3 alongside strength in starts, suggesting a likely solid path for both measures through Q4. Housing starts should rebound to a 1.285 mln pace in October, after the dip in September. Permits similarly are expected to rebound to 1.370 mln in October. Wednesday – 20 November 2019 Interest Rate Decision (CNY, GMT 01:30) – The PBoC is not expected to change its interest rates, at 4.2%. Inflation Report Hearings (GBP, GMT N/A) –The BOE Governor and several MPC members testify on inflation and the economic outlook before the Parliament’s Treasury Committee. Consumer Price Index and Core (CAD, GMT 13:30) – The Canadian CPI for October is expected to have come out higher than last month, at 2.1% from 1.9% in September, after the 0.1% dip in August, as declines in gasoline prices and tuition costs weighed. The CPI added to the backing for no change in rates from the BoC in October. Monetary Policy Meeting Minutes (USD, GMT 19:00) – The FOMC Minutes report provides the FOMC Members’ opinions regarding the US economic outlook and any views regarding future rate changes. Thursday – 21 November 2019 ECB Monetary Policy Meeting Accounts (EUR, GMT 1:30) –The ECB Monetary Policy Meeting Accounts, similar to the FOMC minutes, provide information with regards to the policymakers’ rationale behind their decisions. In the last ECB meeting, ECB kept policy settings on hold at Draghi’s last meeting, as widely expected after the comprehensive easing package announced in September. Philly Fed Index (USD, GMT 13:30) – The Philly Fed index is seen rising to 7.0 from 5.6 in October, versus a 1-year high of 21.8 in July and a 33-month low of -4.1 in February. The “soft data” measures have largely stabilized since June around moderate levels, though with a headline from the UAW-GM strike in recent months that seemed to have impacted some surveys but not others. The trade war headwind may subside somewhat in November, though the markets still face a wide array of troubles abroad. Friday – 22 November 2019 Gross Domestic Product (EUR, GMT 07:00) – German Q3 GDP expanded 0.1% q/q – boosted by consumption. Germany not just missed a technical recession, the economy actually expanded slightly in the third quarter, as Q2 was revised down. However, we expect no turnaround yet for the final Q3 GDP, despite the higher headline rate, as the balance of risks remains tilted to the downside. Markit Services and Composite PMIs (EUR, GMT 08:30-09:00) – The prelim. EU Markit PMI Indices are expected to continue above 50, but slightly decline to 51.9 and 50.3 respectively, according to consensus expectations. As for Manufacturing PMI, in November a slight improvement is expected at 46.0, even though the headline rate remains in contraction territory. Retail Sales (CAD, GMT 13:30) – Retail Sales are forecasted to have registered a flat outcome in Canada, after mild declines of 0.1% in August. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Renko Full Throttle PRO IndicatorNew Set is released for DAX 30 Min Chart: Recorded Success rate is 85% in the last year with40 total trades34 trades hit TP6 trades hit SLSuccess rate is 85%      
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.