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Levels of Access to the Game |
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For the active trader, the single most valuable offering is what is called Level II quotes. These quotes are for the NASDAQ computer-traded market only. Packages of real-time charting, news, and Level II quotes are now offered for a fairly steep fee ($250 to $350 or more per month) at a number of online sites aimed at active traders. |
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This packaged data, however, may be "free" if you make a certain number of trades per month, depending on the provider. In other words, you will most likely pay something over $500 in commissions per month to get the free quotes. |
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Over the next few years, Level II quotes will become the norm for all online investors, not just serious active traders. And they will drop drastically in cost even to those who don't really need them or care to use them. But once understood, this tool will be appreciated. |
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Having Level II data puts you in the position to see not just the best price at any moment, but where all the market makers (those institutions or individuals who buy and sell shares to the public and "make a market") on a stock stand in relation to each other. You also see what is called time and sales, which is a dynamic scrolling list of all transactions and the time they occur. |
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This data was previously reserved only for market makers or those willing to pay costly monthly fees. It is a speedy and powerful tool that helps level the proverbial playing field for the individual online trader. But you need to get some training to understand it, as it moves very fast. You can get into trouble with it if you don't know what you're doing. |
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With Level II, you see not only the best current price to buy and sell, you are also privy to everything right behind the current prices. You see the "pressure" that is building at various prices, as market makers line up to buy and sell, and thus you get a better sense of which direction the stock is moving. |
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One metaphor that describes this is to say that Level II is like flying an airplane with radar guidance, while Level I is like flying by the seat of your pants, with no radar to indicate direction, force, or turbulence. |
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But the true picture of what is happening in the game is somewhat more complicated. There is another layer of the action. Level II data, while a tremendous advantage over Level I, is still only a part of the whole picture. This is because even with Level II quotes, you |
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