Thinkorswim Level 2 for Beginners and Advanced Traders

Thinkorswim Level 2 is a powerful tool that provides real-time market data, allowing you to make more informed trading decisions.

With thinkorswim Level 2, you can access detailed quotes, including bid and ask prices, for stocks, options, and other securities.

This level of detail is particularly useful for advanced traders who need to analyze market conditions and identify potential trading opportunities.

Thinkorswim Level 2 also offers customizable screens and alerts, so you can tailor your view to fit your trading style and preferences.

Trading is a battle between bulls and bears, with price movement being affected by their interactions.

The market is a war zone where buyers and sellers clash, and traders can influence prices when placing orders.

To navigate this complex environment, traders need to use tools like Level 2 trading, which shows bid-ask spreads and helps gauge potential trades.

Traders can see the price bids and the price ask using L2, giving them an edge in making informed decisions.

However, traders must also consider the many factors that affect the market, requiring them to study and practice to succeed.

Thinkorswim's Level 2 trading service provides real-time access to orders, showing the bid-ask spreads as they happen.

This service is useful for traders who want to analyze the market's supply and demand, which can be affected by emotions like greed and fear.

Thinkorswim's Level 2 includes the depth of price information, showing all the available prices that market makers post.

This is different from Level 1, which only shows the best bid-ask spreads.

With Level 2, you can see the entire order book and make more informed trading decisions.

Level 2 data is like having a backstage pass to the stock market. It shows you who's behind the scenes, making trades and influencing prices. This includes market makers, electronic communication networks, and wholesalers.

Market makers are the most important market makers, known as "The Ax", which controls the price action on stocks. To find out who The Ax is, look at a few days of L2 and see which market maker is consistently dominating price action.

You'll also see electronic communication networks, or ECNs, which are computerized orders that can be used by anyone, even big-time traders. Sometimes, these ECNs are irregular, which can mean a buyout or accumulation is taking place.

To get the most out of Level 2 data, focus on the following:

By paying attention to these details, you can gain valuable insights into the market and make more informed trading decisions.

Tape reading is an essential skill for any trader who wants to understand Level 2 data. It's a way to interpret the information displayed on the Level 2 screen, which can be overwhelming at first.

To start, you need to understand what the Level 2 screen shows. On the right side of the screen, you'll see the Time and Sales, also known as the tape. This is a list of all the trades that have taken place in the stock, including the price, quantity, and time of each trade.

The price number represents the size in hundredths, being bid up at a particular exchange. You'll also see the order size for irregularities, which can mean a buyout or accumulation is taking place.

To get good at reading L2 and the tape, you need to practice observing the market, not just clicking buy or sell buttons. The secret to mastering tape reading is to keep reading it, and the more you practice, the better you'll become.

Here are some key things to look for when reading the tape:

By paying attention to these signs, you can gain valuable insights into the market and make more informed trading decisions.

A stacked order is essentially a list of buy and sell orders for a specific stock, displayed in a hierarchical format. This format shows the price and quantity of each order, with the highest price buy orders at the top and the lowest price sell orders at the bottom.

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In a stacked order, buy orders are listed above sell orders, with the highest price buy orders appearing at the top. This format makes it easy to see the market's overall demand and supply for a particular stock.

For example, if a stock has a buy order at $50 with 100 shares, and a sell order at $49 with 50 shares, the stacked order would show the buy order first, followed by the sell order.

The price of each order is typically displayed in descending order, with the highest price orders appearing at the top. This makes it easy to see the market's overall sentiment and make informed trading decisions.

Buy orders are usually listed above sell orders, with the highest price buy orders appearing first. This is because buy orders are typically placed at higher prices than sell orders.

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Thinkorswim Level 2 can be overwhelming at first, but with practice, you'll get the hang of it.

The color blocks on Level 2 group bids and asks with the same price together, making it easier to read.

You'll see a lot of algorithms and high frequency trading on Level 2, especially for large cap stocks.

Orders on Level 2 are pending, meaning they haven't been filled yet, and you'll only know an order is filled when you see the transaction printed on the time and sales, also known as the tape.

Thinkorswim's Level 2 is free, which is great news for traders.

You can customize the window layout on Thinkorswim by clicking on the Charts tab and modifying the buttons to show what you need.

The TOS charts are flexible and provide traditional bar, line, and candlesticks for charting.

You can connect charts to other windows via color code, making it easier to shift between different stocks on multiple time frames.

Thinkorswim provides a plethora of tools and indicators for users, including momentum studies, trend studies, and more.

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Level II stock data can give you unique insight into a stock's price action, supply and demand, and levels of support and resistance.

You should use Level II in conjunction with other forms of analysis when determining whether to buy or sell a stock, as market makers can disguise their true intentions.

Market makers can do a lot to hide their intentions, making it essential to rely on Level II quotes alongside other forms of analysis.

The average trader shouldn't rely solely on Level II quotes for making investment decisions.

Level 2 trading is a complex game, and manipulation happens a lot.

Market makers can hide their order sizes by placing small orders and updating them when they're filled. This can trick other traders into thinking the market is moving in one direction when it's actually being manipulated.

Smaller barriers can be deceiving, making them easier to push through than larger ones. However, this is where market makers can catch you off guard.

You can't rely solely on level 2 trading, but pairing it with other tools like level 1 can give you a better understanding of the market. Knowing how to trade level 2 means you're aware of the manipulation happening.

Using risk management strategies with level 2 trading can help you stay ahead of the game.