TIMESTAMPS
00:35 – UTILITY
Level 2 market data is also known as the “Order Book”, and it is a list of buy and sell orders for an asset/security organized by price levels.
Level 2 provides real-time access to the best bid and ask prices, the dept of orders at each price level, the size of the orders, and in traditional markets; the identity of the party placing them, i.e., NASDAQ, NYSE. In crypto, you just have one identity i.e. Binance.
Level 2 is commonly used by professional traders and institutional traders to make more informed decisions.
By analyzing the level 2 Order Book, traders can identify potential areas of support and resistance. They can also gain insight into the market sentiment for the given asset.
Limit buys will be visible at the “Bid”, and Limit sells will be visible at the “Ask”.
Once these limit orders get executed, they will show on the Time & Sales, AKA the “Tape”.
Time & Sales is best used when the trade size filters are adjusted to follow the big money.
One thing to keep in mind, Level 2 orders can be quickly manipulated by bots and algos who can quickly hide, add, and remove orders.
Unlike with Level 2, nothing can be hidden from the Tape.
03:11 – EXAMPLE 1
Review of Level 1.
04:03 – EXAMPLE 2
Intro to Level 2.
Level 2 shows us ALL the buyers and sellers at each price level, as well as the order size.
Depth Changes allow us to look at the total volume being added or removed at a price level.
Here you can see orders being removed above the POC, and some added at the POC.
The features of Level 2 are shown in detail on stream, very niche.
07:32 – EXAMPLE 3
Review of the feature of Time & Sales or the “Tape”.
Orange = bearish (sells)
Blue = bullish (buys)
10:19 – IMPLEMENTATION
As the level 2 is best explained LIVE in the action, for the implementation part of the lesson, there are live trade recordings shown.
10:44 – TRADE #1
Short trade setup, 3 contracts trading directly from DOM, using Time & Sales. 1:1 risk to reward ratio, 10 ticks profit target. Target hit.
19:43 – TRADE #2
Long into Short trade setup, 3 contracts trading directly from DOM, using Time & Sales. 1:1 risk to reward ratio, 10 ticks profit target. Target hit.
25:11 – TRADE #3
Scalp long, 3 contract momentum trade with 4 tick risk and 4 tick profit goal. Target hit.
28:58 – TRADE #4 & 5
★ A loss mitigated into a win.
Short scalp, choosing the highest sell cluster to trade with the trend. 4 tick, 1:1 R:R. Stopped out.
Re-entry to short scalp at the next highest sell cluster. 4 tick risk, 8 tick profit, 2:1 R:R. Increased profit target to mitigate earlier loss. Target hit.
34:48 – TIPS & TRICKS
*Use the real-time data from Level 2 to confirm the S/R levels we mark on our charts with KEY SIZE orders.
*Find the zones with the most orders stacked or removed to identify potential S/R areas.
*Follow the big money traders by filtering the TAPE for larger orders (>25).
*Level 2 is a great tool for scalp traders, but not as useful for swing traders.
*Beware of potential manipulation on the Level 2, which is why we use it alongside the Time & Sales.