Level II trading tips | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

133 TRADING TIPS. by AK Forex 8 replies

Tips/methods for avoiding ranging market, is 50 RSI level enough? 0 replies

My GBPJPY Trading Journal - Trading from level to level 23 replies

Any tips, strategies, or methods on trading NZD??? 7 replies

Tips for Trading the Major Currency Pairs 4 replies

Level II trading tips

  • #1
  • First Post: Sep 3, 2008 9:33am Sep 3, 2008 9:33am
hello everyone .... I have a question for any of you traders ..

Do any of you trade with the Level II screen ( a la MB Navigator ) ?

I was wondering if anyone has any tips or strategies regarding the Level II screen . I understand there are other ECN's besides MBtrading buty they are probrably out of reach for most of us.

I have noticed that I can see orders and lots sizes but I don't really understand yet how to use it to my advantage ..

Thanks you in advance.
  • #2
  • Sep 4, 2008 1:43am Sep 4, 2008 1:43am
C'mon ..... anybody ?

It's not like I'm asking what to do ..... I just wonder how many traders use Level II style tactics ... surely if I asked about MACD croosovers , BB's , EA usage or other related I'd get loads of answers ..

Or maybe nobody uses Level II information to help their trading decisions ..

Me personally , I'm more of a naked style trader .. but as I have a LevelII screen , Im curious who else uses it ..
  • #3
  • Sep 4, 2008 4:45am Sep 4, 2008 4:45am
I'm curious aswell. In Futures Trading alot of scalpers main tool is the Level II Screen or any DOM screen. Paul Rotter (EUREX Flipper) is just an example.
  • #4
  • Sep 4, 2008 9:21am Sep 4, 2008 9:21am
Currencies mainly trade in the interbank, therefore there's no centralized exchange. So no level 2 data is accurate.
  • #5
  • Sep 4, 2008 9:56am Sep 4, 2008 9:56am
I use it occasionally to get an idea of the net positioning of retail clients. The L2 display on MBT's platform is limited to 10 levels deep, however if you view it in a 3rd party app, it will show you all levels (all client limit orders at any price).

Here's what it looks like on fiber. The offer side scrolls down to show twice the level of orders as you're seeing in that pic (I couldn't fit the whole book in one screen capture). What does this mean? Certainly some of those orders shown may be new orders to sell short, but I lean towards most of them being sell limits to exit existing, underwater long positions. If I see a book as overweight to one side as this, generally I won't enter on the overweight side (unless overwhelming indications to do so as per my trade methodologies). In the majority of scenarios, the market will continue moving in the direction of the underweight side.
  • #6
  • Sep 4, 2008 2:03pm Sep 4, 2008 2:03pm
Quoting Trader KGB
I use it occasionally to get an idea of the net positioning of retail clients. The L2 display on MBT's platform is limited to 10 levels deep, however if you view it in a 3rd party app, it will show you all levels (all client limit orders at any price).

Here's what it looks like on fiber. The offer side scrolls down to show twice the level of orders as you're seeing in that pic (I couldn't fit the whole book in one screen capture). What does this mean? Certainly some of those orders shown may be new orders to sell short, but I lean towards most of them being sell limits to exit existing, underwater long positions. If I see a book as overweight to one side as this, generally I won't enter on the overweight side (unless overwhelming indications to do so as per my trade methodologies). In the majority of scenarios, the market will continue moving in the direction of the underweight side.

ok, now we getting somewhere ... that looks nowhere near like the screen I get in Navigator. I will digest what you said .. it seems that 10 levels isn't really deep enough to see the whole picture.. I will observe the level 2, and will consider what you mentioned and see how it fits in my mind, surely there must be a way to take advantage of the 10 levels. I see no point in Navigator having that level2 unless it serves a purpose, no ? Unless it is meant to entice me into a third party app. Now that I think of it , it's prob residual from the stocks and futures side of MB trading and they didn't want to remove it for FX ( too much hassle )



Quoting JodyOng
Currencies mainly trade in the interbank, therefore there's no centralized exchange. So no level 2 data is accurate.
I understand FX is not centralized, therefore level2 isn't accurate but then again there's other bits of represented data which isn't accurate. Not the thread to discuss this...


Thank you for your input TraderKGB ... hopefully others will chime in on the thread.
  • #7
  • Sep 4, 2008 3:01pm Sep 4, 2008 3:01pm
Quoting Yonipaliyo
I see no point in Navigator having that level2 unless it serves a purpose, no ?
Well offering a public L2 is pretty much a mainstay of being an ECN. It isn't really necessary per se, but I haven't encountered an ECN that didn't offer a L2/DOM feed.

***

Going back to my original post, today is a perfect example of the market continuing to move towards the underweight side of the book.
  • #8
  • Sep 4, 2008 4:24pm Sep 4, 2008 4:24pm
Re: Level II

One thing I've learned through experience is that when you see that huge order
with hundreds, or even thousand of contracts available at one price, don't be fooled
and don't get excited about it.

During routine market conditions (no news, no holidays, no special stuff) either that bid or offer
will disappear as quickly as it appeared, or when it starts getting filled partially or completely,
a large chunk of liquidity has then been absorbed and there's a good chance that the guy (or bank)
who bought 500 or 1000 at the figure will live to see 02 or 03 bid or some kind of
renumeration for some of those contracts and then peel off the rest again back at the figure.

The combinations of what if this and that are endless, but just as an example
where the figure is getting bought heavy at one price, I won't sell against him directly.
I'll wait a minute or two untill he's done doing his thing and then look at what I want to do.

This is one of the advantages of the DOM or ladder or whatever we like to call it thse days.
  • #9
  • Sep 4, 2008 5:36pm Sep 4, 2008 5:36pm
Quoting toshi
Re: Level II

One thing I've learned through experience is that when you see that huge order
with hundreds, or even thousand of contracts available at one price, don't be fooled
and don't get excited about it.

During routine market conditions (no news, no holidays, no special stuff) either that bid or offer
will disappear as quickly as it appeared, or when it starts getting filled partially or completely,
a large chunk of liquidity has then been absorbed and there's a good chance that the guy (or bank)
who bought 500 or 1000 at the figure will live to see 02 or 03 bid or some kind of
renumeration for some of those contracts and then peel off the rest again back at the figure.

The combinations of what if this and that are endless, but just as an example
where the figure is getting bought heavy at one price, I won't sell against him directly.
I'll wait a minute or two untill he's done doing his thing and then look at what I want to do.

This is one of the advantages of the DOM or ladder or whatever we like to call it thse days.
Precisely why I have trouble figuring out a "clear" way to use level 2 info ... I see the orders come and go at such speeds I don't really make sense of it. At times I think of it as a pretty flickering rainbow ( slightly kidding ) , other time I notice there is a lot of activity in a certain area ... but I've yet to harness it ..... I really want to understand this ... thank you

  • #10
  • Sep 4, 2008 7:43pm Sep 4, 2008 7:43pm
Without knowing if those order have been executed or not, you'll be in the dark whether the buy/sell pressure is real or artificial. In stocks when scalping the combination of L2 and Time n Sales is very precious, charts become secondary.

You can actually see with fairly good accuracy what is going to happen in a few seconds time by reading (correctly) the activity on the L2 and Time n Sales

But let's assume all orders are real and get executed when hit, if a level is being eaten and eaten but price hasn't moved yet, hmm what does it tell you?


There's no easy way around this, you'll need to watch a short chart and its L2 for many hours to gain an understanding of how price changes
  • #11
  • Sep 5, 2008 3:08am Sep 5, 2008 3:08am
Quoting bobblong
Without knowing if those order have been executed or not, you'll be in the dark whether the buy/sell pressure is real or artificial. In stocks when scalping the combination of L2 and Time n Sales is very precious, charts become secondary.

You can actually see with fairly good accuracy what is going to happen in a few seconds time by reading (correctly) the activity on the L2 and Time n Sales

But let's assume all orders are real and get executed when hit, if a level is being eaten and eaten but price hasn't moved yet, hmm what does it tell you?


There's no easy way around this, you'll need to watch a short chart and its L2 for many hours to gain an understanding of how price changes
Assuming the orders ARE real and get executed , the reason a level gets eaten and doesn't move is because there is an egual opposite force ? I been thinking a bit about this but I need to watch the charts and level2 to see what you mean.

So far I've watched the level2 but in tandem with my main charts which are usually 1hr , 15m , and at times 5m .... the 5m being used when im actually in a trade .... I never really pay attention to the ultra shorter timeframes , but what you mentioned makes total sense ( and never occured to me ),
today I shall watch 1m and tick charts with level2 bside it and see if I can grasp what is happening.

I think the orders are real , I can't imagine MBT using fake buy and sell level2 info ...... I'm trading a live account since Sept. of last year .


screen time , screen time , rest , screen time , more screen time , more rest , even more screentime ....... this has been the only way I've managed to survive ..lol

Thank you for your help.
  • #12
  • Last Post: Sep 5, 2008 8:28am Sep 5, 2008 8:28am
I don't think the question was if MBT, or any other ECN, is faking orders, but rather, if those orders get pulled if they come near execution. This can can often be observed in futures markets. For example, there was a famous trader on Eurex a few years ago, who would post massive size at one level (say 5000 bunds bid), then market buys say 200 contracts into his bid, and all of a sudden he flips to 5000 offered. Buy another 200 into the offer, and of course all of a sudden its back to 5000 bid. Occassinaly he got creamed when the market took out one of his ridiculous orders completely.

I doubt such games get played much in FX tho, due to the decentralized nature of this market, and the lack of times & sales data. L2 however is important for executing big orders, that exceed the size of the best bid/offer, to estimate what price you will get. But, without some sort of automation its useless in my opinion, the numbers fly by so fast, i doubt this data can be processed by a human in any meaningful way.
0 traders viewing now