How to read Level 2 data

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First things first, 

What is Level 2 data?

Level 1 data shows the best bid and ask price for a security. Level 2 data takes this to the next level by showing market depth or a range of the best bid and ask prices, and volumes being traded at each price level, in real-time.

The best part? Unlike other trading platforms, moomoo offers free level 2 data.

Why is Level 2 data important?

● Market depth and intraday shifts in momentum. Since level 2 data shows pending orders that haven’t been executed yet, it shows market sentiment throughout the day as price and volume shift from the left side of the order book (bid) to the right (ask) or vice versa.

● Stock liquidity which determines how quickly you can open or close positions. A large market cap and high trading volume signal stock liquidity. Generally, the smaller the spread between the bid and ask prices, the more liquid the stock is.

How to use Level 2 data?

L2 data shows market demand (bids on the left) and supply (asks on the right). As L2 data represents orders waiting to be executed, it may signal future price movements. A bid for a large number of shares tends to push the stock price higher as it signals higher demand. Conversely, an ask for a large number of shares tends to push the stock price lower as it signals that supply > demand.

The key to using L2 data is lots of practice, so let's get started.