Hello all,

I have been reading about level 2. All the information that I can find is about what is actually displayed on the screen in terms of buy and sell orders.


However I am struggling to understand how this information can actually be used to improve your trading. I would appreciate your comments!

This might help - although its now quite old. Use CFD's - derivatives do not attract stamp duty. Firms offering CFDs normally advertise in the FT.Find a broker that allows you to enter orders directly into the SETS book. (Subscribe to ADVFN's Level 2 to view the book in real time from your screen)Looking at ARM currently (Best example I can find quickly - there's no good examples when the market is closed):

Level 2

06/01/2001

16:16:50

Help

ARM HLDGS. (ORD 0.05P) Prev.Close 502 GBX NMS 50000 ISIN GB0000595859 Sector FT10 Segment SET1 SEDOL 59585 Last trade 515.758 O at 17:13:23 Vol 5,000 Prev trades 508 500.738 501 505 Trade Hi 532 Trade Lo 491 Cum Vol 6,420,387 Cur Hi 530 Cur Lo 496 Open 497 Cur 508 +6 (1.20%)

1

2,114

501

-

508

53,540

2

Buy Volume 41,973 Depth 8 Avg.Size 5,247 VWAP 489.959

2,114 501 1,057 500 6,000 500 2,114 498 5,000 491 3,000 490 12,688 488 10,000 480

508 3,540 508 50,000 514 2,000 519 12,688 520 10,000 537 5,000 617 1,000 700 6,000 750 1,850 780 1,229 790 425 800 8,525 1050 700

Sell Volume 102,957 Depth 13 Avg.Size 7,920 VWAP 560.988

If you don't understand what you're looking at, click here, otherwise this explanation will be wasted on you. :-)

This looks like an intraday short from good resistance @ 508.If I were to short ARM 3,000, I have three options: 1) I can sell 2114 at 501.5, with the remaining 886 at 500.5 and be instantly filled at an average price of just over 501. This is what a conventional broker will probably offer you if you wanted to short or close a long.2) I can place a sell order for 3,000 @507 (or 507.5) - in which case everybody's screens will update to show a new price of 501.5/507. I run the risk of not being filled or of being part filled if somebody else comes in at say 506. Interestingly, If I were filled @ 507, I could immediately place a buy order @502, which, if filled, would net me an instant 1% before commission (I pay 0.5% for the round trip).3) I can place a sell order at 508 - in which case I join the back of the 508 queue, and get filled once all of the other 508s are filled (Dumb move on this book, but would strengthen the resistance if I was already short)

In this example, my whole short would have been based on the resistance at 508 (50,000 is a significant sell order for ARM). So my stop loss says that the second 508 is breached, or the 50,000 @ 508 order is withdrawn, I'm out. I would have been proved wrong. ie stop loss is near as damnit 0%.

Hope that answers your questions.

Gausie

I think I understand that. Thanks Gausie. Do you have any examples of how it can be used for longs / share buying?

T12,

this link should help...

http://www.stockmarketlevel2.com/level-2-heart-of-the-stockmarket.html

Excellent Goldfinger. That's helped. Thanks