One of the great things about trading is that there is always something going on. Granted, this isn’t always nice news. But the market is never boring and there are always new challenges and lessons to be learned. Despite having been trading my own account for a living since 2016, I still feel that every day is a school day – becoming a better trader is a constant journey.
Stocks react to different events and, while technical analysis can be used to predict future prices, it is no guarantee. The same goes for Level 2 data. Many people believe that it can be used as a crystal ball. It can’t (or, at least, not for me). Level 2 data shows us the market as it is in real-time, which can be used to gain a better entry or exit on our trades (which certainly adds up and compounds over time), but other than this it provides zero insight into a long-term trend.
For example, if you are looking to get long and place a trade onto the order book to bid for stock rather than pay the asking price from a market maker (and bear in mind this only applies to SETS-traded stocks as there is no order book on the London Stock Exchange’s SETSqx platform) and you see a big order, you have a higher chance of being filled by going above the big order rather than below it. If you place your order below the big order, then the big order would take priority in terms of execution, and so you’d need to wait for it to be filled completely (and for all we know it could be an iceberg). If you go above it, then not only do you take priority in being filled but also the big order below will soak up additional selling pressure for you and act as support. That is, of course, assuming it isn’t a spoof order, which deletes itself whenever someone tries to sell into it.