What is Level 2 Data?
Level 2 data shows the full order book for a security, displaying all pending buy and sell orders at each price level, giving traders insight into supply and demand beyond the basic bid and ask.
Level 2 Data Explained
Level 2 data reveals the depth of the market — how many shares are waiting to be bought or sold at each price level. This helps traders identify support and resistance levels based on actual orders, spot large institutional orders (which may act as walls), and gauge the urgency of buyers versus sellers. It's essential for day traders and scalpers.
Real-World Example
Level 2 shows 10,000 shares bid at $50.00 and only 500 shares offered at $50.05. This heavy bid suggests strong buying support at $50. A trader might place their stop loss below this level, knowing there's significant demand to hold the price up.
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