Tim Bohen, lead Trainer with StocksToTrade is discussing something that is one of the most often asked questions today. And how many traders tend to overcomplicate it… Level two quotes.

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Level two quotes can be confusing if you don’t know what you are looking at. Many traders see all these numbers and colors and wonder what it represents — the how and the why. And how exactly you can use it to trade.

To break it down, you've got two sides to the level two box. There’s the bidders and the ask. On the left you have the bid side. These are buyers. Then in the next column, you have the price those bidders are willing to pay. The ask is your sellers.

On the right, there’s the level one box. This shows completed transactions. Remember, unless someone is willing to buy and someone's willing to sell, nothing happens with a stock. No trade is executed. It’s best to stick with liquid stocks. They have what is called a tight spread. The difference between the bid and the ask is only a couple cents. A less liquid stock would have a wider spread and less activity. This makes it difficult to get in and out. So, it’s best to avoid stocks that are illiquid.

So, how do you make trades off of level two? This is sometimes an unpopular opinion, but especially in liquid stocks, it’s very difficult to get a read. There’s a lot of HFTs, high frequency traders, meaning there's a lot of spoofing going on.

Look for sentiment. Is the bid upticking? Do you know bidders are coming in? That would be a bullish sentiment. Or are the bidders going away? Are they lowering their price? Is the size going away? Less buyers means less bullish. Vice versa if you're short, you want to look at the ask side and see if there are a lot of sellers. And are the sellers dropping their price? That could be interpreted as bearish.

In summary you should be familiar with level two. You should understand how it works. But remember only price pays. Focus on the chart, focus on the candlesticks. Unfortunately, there’s also a ton of games in level two, making it tough to get a read. While it's useful, don't put too much emphasis on it either.

#StocksToTrade #TradingStrategies #Level2
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*Tim Bohen teaches skills others have used to make money. Most who receive free or paid content will make little or no money because they will not apply the skills being taught. Any results displayed may be exceptional. We do not guarantee any outcome regarding your earnings or income as the factors that impact such results are numerous and uncontrollable.

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