How Level 2 Market Data Contributes To More Informed Trading Decisions

When it comes to analyzing a stock, it is always helpful to have access to a broader range of tools and data. Level 2 market data play an important role in providing users with enhanced levels of in-depth market information necessary to make more informed decisions. Contrary to Level 1, which mainly displays the lowest ask and highest bid for a share on a real-time basis, Level 2 provides a ranked list of buy and sell orders. Specifically, users can view multiple bid and ask prices, along with their respective sizes.

How will this benefit the individual investor? A key advantage is greater market transparency. Level 2 market data show the cumulative number of shares that market participants are willing to buy and sell at different prices that cannot be viewed in standard Level 1 data. With this order information, a Level 2 user may gain better insight into the underlying trends in supply and demand for a given stock. 

For example, if you were trading a particular stock, instead of being limited to the current best bid and ask prices which may be $2.09 and $2.10 respectively, a Level 2 screen would display a list of bid prices below $2.09 and ask prices above $2.10. You may see there are more shares being offered on the ask side than the bid side, indicating a possible short-term bullish bias. By examining the imbalance between bid and ask, you may have a clearer view on how orders are distributed in the market and discern the likely direction of the share’s price. 

Although Level 2 information can be deceptive, given the possibility of hidden orders, the availability of more market data certainly improve investment accessibility. 

The premium data feed is often offered for a fee in the market as an advanced feature. However, you can access it for free at TradeUP. The mobile-based investing app now provides NYSE ArcaBook for free, enabling users to leverage Level 2 data for more than 8,000 securities traded on NYSE Arca. Launched in January 2020, TradeUP aims to make investing more relatable by breaking the last remaining barriers to the industry, allowing users to enjoy a simplified trading experience with the same access to valuable tools.  

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Zero-fee or commission-free trading means $0 commission trading on self-directed individual cash or margin brokerage accounts that trade U.S. exchange-listed stocks and ETFs online. A $0.65 per contract fee applies to options trades. For more information, see our full pricing details: https://www.itradeup.com/pricing/commissions-us.

Brokerage services in TradeUP are offered by Marsco Investment Corporation. Download TradeUP in the Apple App Store or Google Play for free. For more information, please visit TradeUP's website: https://www.itradeup.com/. Marsco Investment Corporation is a registered brokerage firm at SEC (CRD:18483; SEC: 8-36754), a member of FINRA／SIPC and a member of DTC/NSCC, regulated by the US Securities and Exchange Commission and Financial Industry Regulatory Authority.

All investments involve risk, including possible loss of principal. Past performance of a security, market, or financial product does not guarantee future results. Electronic trading poses unique risks to investors. System response and access times may vary due to market conditions, system performance, and other factors. Market volatility, volume, and system availability may delay account access and trade executions. The contents of this article shall not be considered a recommendation or solicitation for the purchase or sale of securities, futures or other investment products.