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Warrior Starter, Chapter 8

Level 2 market depth shows the bid and ask prices for a stock as well as the number of buyers and sellers at each price level, revealing how thick or thin the market is at different prices. Thinly traded stocks with lower floats often have bigger spreads and quicker price moves but can offer higher risk and reward. More heavily traded stocks have thicker market depths due to many more buyers and sellers and large volumes, making them harder to day trade using Level 2 readings alone. The Warrior Pro courses will extensively discuss reading and using Level 2 to identify low-risk entries, capture quick profits from breaks of highs or critical levels, and take breakout trades for small gains per share.

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435 views4 pages

Warrior Starter, Chapter 8

Level 2 market depth shows the bid and ask prices for a stock as well as the number of buyers and sellers at each price level, revealing how thick or thin the market is at different prices. Thinly traded stocks with lower floats often have bigger spreads and quicker price moves but can offer higher risk and reward. More heavily traded stocks have thicker market depths due to many more buyers and sellers and large volumes, making them harder to day trade using Level 2 readings alone. The Warrior Pro courses will extensively discuss reading and using Level 2 to identify low-risk entries, capture quick profits from breaks of highs or critical levels, and take breakout trades for small gains per share.

Uploaded by

vimoe
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER 8.

MARKET DEPTH
PART 1: UNDERSTANDING LEVEL 2

Today’s Lesson
1. Reading Market Depth

2. Visualizing thin vs thick market depths

 
1. Level 2 – Market Depth
Level 2 is very important because it shows you
the Market Depth. This shows you the Bid and
Ask, but also how many buyers are lined up
just below the bid and just above the ask. This
tells us if there are big buyers/sellers close by.

Level 2 - Color Schemes


I use a color scheme that highlights a different
color for each tier. In this example, all orders
on the ask at 272.95 will be green (the best ask
price). There are 2, therefore, there are 2 green
rows.

All orders at 272.71 will also be green (best


bid), there is only 1, therefore there is only 1
green row.
2. Thinly traded stock - Lower float stock

Helpful Tip: Stocks with floats less than 50mil will often trade more “thinly”, meaning bigger spreads and quick moves!!
These are higher risk, but can be higher reward as well. This becomes exponentially true the lower the float.

Thickly traded stock - higher float stock

Helpful Tip: Higher float stocks like this are more difficult to day trade, and typically the Level 2 is not going to be
especially helpful to read due to massive amounts of buyers/sellers and volume.
Becoming a Master of Reading Level 2
Level 2 will be discussed EXTENSIVELY as part of the Warrior Pro courses because I do
rely on it as part of my strategy. You will learn...

1. How to use Level 2 to identify low risk entry points on fast moving stocks

2. Capturing quick profit on high of day breaks and breaks of critical levels.

3. Taking breakout trades for small 5-10 cent per share profits by reading Level 2.

Blank slide for additional


note-taking

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