Day Trade

Warrior
Advanced Level2
Techniques
Advanced Level 2
 Learn to read the Level 2 and understand
buy and sell signals.
 Studying Level 2 can be good for scalping
and finding quick entries and exits.
 Level 2 can show us where retail buyers
and sellers are lining up.
Chart Reading vs Level 2
 Level 2 is really important, but it doesn’t
override chart reading.
 As pattern based traders our first focus is
finding good patterns.
 Reading Level 2
Bid Support Concepts

Showing “Fake” Orders

Showing Resistance

Looking at Market Depth

 Time & Sales
Watch the order flow in the Time & Sales

Large orders indicate Retail Interest

Orders in Green are at the ASK price

Orders in White are in between BID/ASK

Orders in Red are at the BID price

Time & Sales tips
 Pauses in Time & Sales are usually a
bearish signal for me
 A Heavy ASK at a key level of resistance
confirms that the resistance is real. Look
for the shares to get bought and then a
quick breakout over that price
 Breakout Trading at key Price Points
requires Time & Sales and Level 2
How to Hide Shares
 Using ARCA you have to display 10% of
your actual size. If you have 100k shares
you can show 10k.
 If you are selling a thinly traded stock, you
may want to hide your shares to not scare
away buyers
Market Manipulation
 Some traders will place extremely large
orders without the intention of having
them executed.
 A “fake” buy order on the bid of 200k
shares could make retail traders think
there are big buyers.
 In reality, that order will probably be
canceled before it is filled
Institutional Traders
 Institutionalbuyers may not be
represented fully in Level 2
 This is one of the reasons some traders
believe focusing on Supply and Demand
areas on the chart is more important than
using level 2.
How to Identify Institutional
Trades
 Intuitionaltrades that are executed by an
algo/computer are typically 100 share
blocks.
 These orders fire off rapidly and can
deceive traders into thinking there are
buyers/sellers.
 These trades do not necessarily represent
retail traders
Low Volume Stocks
Big Spreads are common on Low Volume Stocks
Direct Access Routing
 Send your orders directly to the market
maker displaying shares available on the
ASK or BID for the quickest fills.
 Super Smart orders in Lightspeed will send
orders to multiple routes and gives you
partial fills from all of them until your shares
are gone. The cost is higher, but
execution speeds and fill times are
excellent
Dark Pools
 Dark Pools are where institutional traders
place their transactions
 These “pools” of shares are not available
to retail traders
 This means when a retail traders places a
buy or sell order, we won’t get access to
those shares.
 Some Brokers allow Dark Pool Routing
Direct
Access
Routing
Adding / Removing Liquidity
 Adding Liquidity to the Market means you
are adding shares that can be bought or
sold. This would be any order that is not
immediately “marketable” or filled when
it’s placed
 By Adding Liquidity to the Market, many
Market Makers will give you ECN Rebates
 When you Remove Liquidity you may get
charged an ECN Fee.
Adding Liquidity
 Adding Liquidity to the Market means you
are improving market liquidity by adding
shares.
 This would be considered ANY order that
is not immediately Marketable.
 When you Add Liquidity, you get PAID
ECN rebates. ARCA pays .005
 This means if I sell 10k shares on the Ask
ARCA will pay me $50.00
Removing Liquidity
 When you place a market order, you are
taking liquidity away from the market.
 Some brokers will charge you an ECN fee
for this. It may be anywhere from .0025-
.01
 This can be costly, but is the price to get
fast executions with direct market routing
Extras & Links
 Emailme with questions
daytradewarrior@gmail.com