ECNs are designed to facilitate trading and will automatically match buyers and sellers that have the same price criteria. In this Level 2 window, “39 ARCA 114.01” signifies that within the ARCA network, the best bid from investors is currently for 3,900 shares at a price of $114.01. In our previous car example, we used the individual names in our Level 2, but here the “names” are simply each individual ECN (Electronic Communication Network). For example, the “6” on the top left represents 600 shares. The number of shares is divided by 100 for simplicity. This area shows the total number of shares investors are willing to buy at the corresponding prices. Included is the intraday high/low, the last trading price, the previous trading day's closing price, today's opening price, the current percentage change, and the total volume traded. This part of the level 2 window contains basic information about the stock (in this case, the SPDR S&P 500 (NYSE: SPY) ETF). Now let us return to, and dissect a standard Level 2 window.

Since Amanda's order was filled, she is now removed from the level 2 box.Įvery time a transaction occurs, it is recorded in what is referred to as the “Time & Sales” box, which lists the price, quantity, time, and market of the transaction. Steve has purchased 1 car and still has an open order for three additional cars. The sale is going through at 10:30am facilitated by the Bank of Awesome. Now that Steve and Amanda have a mutually agreed upon price, a transaction will occur and the level 2 box will reflect the instance accordingly. Thus, Amanda will add her “ask” to the level 2, which will be reflected as such: Seeing the level 2 quotes, she knows that there is a request to buy at $19,750 and is willing to sell at that price. To illustrate this, Amanda, who lives a block away, is in desperate need of cash and has an identical car to sell. It is important to understand that a trade will only occur when a buyer and seller have identical pricing constraints. Your father James thinks the cars can be re-sold for a higher profit in a year and would be willing to buy eight of them, but will not pay more than $19,000 a piece.Ī level 2 quote window for this scenario will look like this: Your cousin Steve thinks that the cars are a bargain and wants to buy 4 of them at $19,750 each. Your friend Greg wants to buy one car for $19,500.

Your neighbor Michael has a group of cars he wishes to sell for $20,000 a piece. Below is an example of a standard level 2 window.īefore moving on, it is best to use a simple story as an example. The ask side is arranged in an ascending order with the lowest ask on the top with higher prices below. The “ask side,” located on the right, shows the total number of shares that sellers wish to sell at corresponding prices. The bid side is arranged in descending order, with the highest bids on the top and lower bids following below. The bids, which are located on the left, show the total number of shares that buyers wish to purchase at the corresponding price. Simply put, a level 2 window is split in to two sections - the bid and the ask side. There is hope, however, as It is very straight forward and easy to understand. The endless stream of constantly changing numbers and quotes can be quite daunting and make keeping up seem like an effort in futility. Many novice traders are intimidated by the plethora of information presented to them in a level 2 window. Fully understanding level 2 quotes is vital to successful day trading.

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