Level 2 Quotes
Quick Definition
Real-time order book data showing all bid and ask prices with their sizes from every market maker and ECN.
Key Takeaways
- Level 2 shows all bid and ask orders at every price level, not just the best bid/ask.
- It reveals supply/demand dynamics, support/resistance, and institutional order flow.
- Hidden (iceberg) orders don't appear, and displayed orders can be cancelled instantly.
What Is Level 2 Quotes?
Level 2 quotes (also called the order book or depth of market) provide a real-time view of all pending buy and sell orders for a security at every price level. Unlike Level 1 data—which shows only the best bid and ask (the National Best Bid and Offer, or NBBO)—Level 2 reveals the full queue of orders behind the top of book. Traders can see the size and price of orders from each market maker, ECN (electronic communication network), and exchange. This data reveals supply and demand dynamics: a large cluster of buy orders at $49.50 suggests strong support, while a thin order book above $50 signals potential for a rapid price move. Day traders and scalpers use Level 2 to spot institutional order flow, identify support and resistance, gauge liquidity, and time entries and exits. Level 2 access is available through most brokerages, often for a monthly data fee ($10-25/month). It's important to note that displayed orders can be cancelled or modified instantly, and hidden (iceberg) orders don't appear in Level 2 data.
Level 2 Quotes Example
- 1Level 2 shows 50,000 shares bid at $49.95 and only 2,000 shares offered at $50.00—a likely breakout above $50 if buying continues.
- 2A day trader sees a large 100,000-share sell order at $25.00 on Level 2 and avoids buying until that resistance is absorbed.
Related Terms
Bid Price
The highest price a buyer is currently willing to pay for a security — it is the price you will receive if you sell immediately.
Ask Price
The lowest price at which a seller is willing to sell a security, also known as the offer price — it is the price a buyer must pay to purchase immediately.
Market Maker
A firm or individual that continuously quotes both buy and sell prices for a security, providing liquidity to the market.
Liquidity
The ease and speed with which an asset can be converted to cash without significantly affecting its market price.
Stock
A security representing ownership in a corporation, entitling the holder to a share of profits and voting rights.
Initial Public Offering (IPO)
The first sale of a company's stock to the public, transitioning it from private to publicly traded.
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