Level 2 is a subscription-based service introduced in 1983 that provides real-time access to the NASDAQ stock market order book. It displays market depth and dynamics to traders and investors by showing bid and ask prices and sizes for all securities listed on NASDAQ and traded on the OTC Bulletin Board. While Level 1 provides sufficient information for most investors, active traders prefer Level 2 as it shows supply and demand at price levels beyond the best bid and ask prices. This helps traders determine entry and exit points with sufficient liquidity to close trades.
FAQ
What is Level 2?
Level 2, also known as the Nasdaq Quotation Dissemination Service (NQDS), is a subscription-based service introduced in 1983. It provides real-time access to the NASDAQ order book, allowing traders and investors to view market depth and dynamics.
The service offers price quotes from registered market makers for all securities listed on NASDAQ and traded on the OTC Bulletin Board. It visually presents bid prices and sizes on the left side and ask prices and sizes on the right side.
Why is Level 2 favored by active traders?
While Level 1 provides sufficient information for most investors, active traders often prefer Level 2 due to its ability to display supply and demand beyond the national best bid and offer (NBBO). This means it shows price levels and associated liquidity that are not available through Level 1.
By having access to this additional data, traders can visually analyze the price range and liquidity at each level. This information enables them to make informed decisions about entry and exit points that will provide the necessary liquidity to successfully execute their trades.
Level 2 is particularly useful for active traders who need a more comprehensive understanding of market conditions, as it provides a detailed view of the order book and allows for more strategic trading strategies.
The comprehension
Level 2, also known as the Nasdaq Quotation Dissemination Service (NQDS), is a subscription-based service that offers real-time access to the NASDAQ order book. Compared to Level 1, it provides additional data on supply and demand at price levels beyond the national best bid and offer (NBBO).
While Level 1 satisfies the needs of most investors by providing the best bid and ask prices, active traders prefer Level 2 for a more comprehensive understanding of market conditions. By analyzing the order book through Level 2, traders can make well-informed decisions about their entry and exit points, considering the liquidity available at each price level.
With its ability to display market depth and dynamics, Level 2 is a valuable tool for traders and investors looking to enhance their trading strategies and stay ahead in the markets.
