Guide to Level 2 Stock Quotes

Level 2 quotes are most often used to help a trader determine short term price movements. Understanding how to read level 2 quotes and where to find a good and cheap level 2 quote provider can sometimes be difficult. At least they were for me. Hopefully, I can shed some light on these two commonly asked questions whether you are looking for level 2 quotes for penny stocks or for the larger stock exchanges.

Level 1 quotes are used to find out the best bid and ask price that is currently available for a particular stock symbol. On highly traded stocks these quotes change constantly as the amount of buyers versus sellers outweighs one another. When there are more buyers willing to buy at or near the current price than there are sellers, the price will go up. How do you know when there are more buyers willing to pay closer to the ask price than sellers willing sell near the bid price? Level 2 quotes. Level 2 quotes provide a list of market makers which show the best bid and ask price that they have in queue.

ADVFN Level 2 Stock Quotes

Level 2 quotes are available for all U.S. stocks traded. If your trading volume is significant, you may be able to obtain Level 2 quotes at no cost through your broker. If, on the other hand, you are a trader with a lower trading volume you will be charged a monthly fee for Level 2 quotes if your broker even provides this service, as many do not.

Additionally, Level 2 quotes don’t just give you the highest and lowest bid price: generally, each market maker participating provides their best bid and ask price as well as the corresponding sizes for each of them. The information also includes the name of the market maker involved and that can be helpful in pinpointing the main traders of any given stock especially if you are trading stocks listed on the larger exchanges like the New York Stock Exchange (NYSE). One you know who the main traders of a stock are, you can follow their transactions and by doing so you will be better able to determine whether any given stock is going to increase or decrease in price.

Because more information is given and it is provided when the action takes place, Level 2 quotes are more helpful to traders than the typical level one stock quotes. This is especially true if the trader is what is known as a day trader, a person or entity that buys and sells stocks within the same trading day. Day traders often take advantage of small movements in a stock’s price using level 2 quotes. A day trader can earn big profits from making quick, but large trades when they see a stock heading in a certain direction.

Other day traders, such as the day traders who engage in buying and selling penny stocks, use level 2 quotes to risk smaller dollar amounts but typically earn higher percentage gains. Penny stocks are typically used in conjunction with a penny stock news scanner to assist the trader with choosing a hot stock that has just released good news. Level 2 quotes for penny stock traders are often considered an essential tool. Level 2 quotes for penny stocks, or what are known as pink sheet stocks or otcbb stocks, usually require a different level 2 quote package for a slightly higher price than a typical NASDAQ/NYSE level 2 quote package.

So who are a few good level 2 stock quote providers? Well since my broker doesn’t provide level 2 quote service I actually prefer to use two different level 2 quote providers. My preference and probably the most popular level 2 quotes for penny stocks is from ADVFN. The level 2 quotes from ADVFN cost is from $29.99 to $49.99 a month depending on how what stock exchanges you need level 2 quotes from, but the first month is free.

My other preference for level 2 stock quotes and much more is from EquityFeed. The price is a bit higher, but they offer much more than just level 2 quotes. They provide streaming real-time data, news, and filings along with all sorts of customized filters available. The price ranges anywhere from $69.95 to $199.95. If you’re interested I would recommend reading the Equity Feed review website to see the full list of features before buying.

These are my preferences for level 2 quotes. My only reason for having two providers is because I can check ADVFN quotes from my smart phone while EquityFeed is geared more towards an advanced trader who is trading from home.

Wikipedia Definitions: Market Maker Financial Quote