LeveL 2 Trading

hi,

what is level 2 trading?

does anyone trade with LeveL 2?

can anyone recommend a technique to trade with level 2?

thanks

I am relatively new to forex. the only understanding I have of level 2 trading is:

1. Tom DeMark Level 2 trendlines

or

2. Trading through an ECN (Electronic Communications Network). Apparently (I am not that knowledgable on this so someone please correct me if I am wrong), the forex is split up into tiers. On the third tier, you have brokers etc who generally offer your a spread on the quotes that are coming from the interbank system, I believe they are called level 3. On the next level, you have firms which can provide you with direct quoted from the interbank exchange and will charge you a commission on each trade you make rather than a spread. The first tier is the banks who make up the interbank exchange I believe.

check here for more details
http://www.goforex.net/forex-basics.htm

I believe the term was originally for Nasdaq Level 2 quotes. With this you can see the best inside bid and offer, market depth (how many are lined up on either side at the different price levels), and how much is available at each price level (for Nasdaq, the amount or volume of shares one has).

It think it has just come to mean any broker or service that allows you see something similar. Having that information can open you up to whole new world of trading, but with Forex, since there is no central clearing, what you'd be seeing is either broker or platform dependant (like EBS or Currenex). Basically you won't be seeing everything, but it's enough to greatly enhance your trading.

For one example, if you see the price starting to tick up at what you think is a bottom, you might be inclined to buy. However, looking at level 2 you see very little volume and depth lined up on the bid and a lot more on the offer, you should probably hold off.