hey everyone thanks for checking out this video my name is travis i'm the
creator of the master the market education that you can find linked below
in the description and this is going to be a video going
over level two and time and sales and throughout this video we're going to
kind of start with the basics and i'm going to explain to you how you can use
level 2 and time and sales to actually improve your trading and to
help you find the best entries and exits on your trades and with that being said
let's go ahead and get started right away with
the first thing which is what is level two
so level two is essentially just an order book for stocks
that's going to show you the buyers and sellers in real time along with the
price the number of shares in the route that
was used for their order so basically this is going to look
pretty much the exact same regardless of which trading platform you're using
uh you can see i have three examples down at the bottom of what level two is
going to look like we have interactive brokers think or
swim and etrade pro and you can see that their designs are a
little bit different with each platform but overall the level two is going to
look pretty much the exact same okay so the main things that make up the
level two are really split up into the left side
and the right side now the left side we have all of the
bids and on the right side we have all of the asks
so the bid is going to be the buyers and that is going to represent really the
demand for the stock and on the other side of the spectrum
the ask is going to represent all of the sellers
and that's going to really tell you the supply for that stock
in real time so anytime you place an order to buy or sell
that order is going to be shown on level two um and it's going to show you
exactly where your order to buy is at as well as how many shares you're planning
on buying and not only you can see that but other traders that are watching
level two for that stock can also see that order until it's
cancelled or until it's filled so with that being said in a way you can
kind of think of level two as a visualization of the real-time
supply and demand for a stock and really this is very important for
trading because supply and demand is kind of the sole reason for stocks going
up and down and what i mean by that is if there is a
ton of demand for a stock meaning there's tons of buyers lined up
at a specific price and there's not very much supplied so
there's not many sellers at that price all of that demand is going to push the
stock price higher and higher until the supply starts to outweigh the
demand for the stock now one thing to keep in mind is that
level two can actually be manipulated in quite a few ways
one way specifically is that orders can actually be hidden from level two
using different routes and different order types mostly this is going to be
done by hedge funds and institutions people using
algorithmic trading so you don't have to worry too much about it
as a new or even intermediate trader but it is important to know because these
manipulation tactics are ones that many new traders fall for
and if you stay tuned for the rest of the video i'm going to show you exactly
how you can actually spot one of these manipulation tactics
to kind of avoid falling for their trap and to actually get on the right side of
the trade but anyway with that being said the
other thing that is going to kind of go hand in hand with the level two
is what is known as the time and sales the time and sales is going to show you
real-time data of each transaction made in the market
so anytime you buy or sell a stock as soon as that order is filled it's
going to be displayed on the time and sales
again not only for yourself but for any other trader that is watching the time
and sales for that specific stock now unlike level
two like i just mentioned things can be manipulated
but with the time and sales every single trade no matter what is going to be
shown on the time and sales there's no way that it can be hidden or
no way that it can be manipulated by hedge funds by institutions or by
anyone for that matter so because of that when you pair the
level two and the time and sales together
that's where you can really get a full story of the price action
and that's when you're really going to kind of set yourself up for success
when it comes to reading that price action and basing your trades off of it
now to break down the time and sales a little bit further you can see that this
is actually broken up into three main sections
first it's going to tell you the time and that is of course just the exact
time of the transaction as soon as it was processed
and then you're going to have last which is the last price of the most recent
transaction and then over on the far right you're
going to have the size and that is going to be the number of shares that were
traded in the transaction so again like i
briefly mentioned already to get the full story of the price
action you want to make sure that you're pairing the level 2 and the time and
sales together and when you do that together these are
collectively referred to as the tape and if you've been trading for a little
while you've probably heard people talking about tape reading
and in my opinion tape reading is probably one of if not the single most
valuable skill that any trader can possibly have and
the reason for that is because it allows you to see exactly what's going on with
the stock's price action in real time and that's going to put you
at a big advantage over someone that's just using
lagging indicators for example like a moving average or bollinger bands
and the reason that those are considered lagging indicators is because they're
using past data and when you're looking at the tape it's
telling you exactly what's happening at the very moment
rather than using past data and again there are many different ways that you
can read the tape and there are many things that you want
to look for ultimately a lot of that is going to be saved for a future video
because it can get a little bit complex i do of course talk about it in much
more detail on my website but just to give you an idea of some of the ways
that you can use the tape um i do have an example here of what are
known as hidden orders so first and foremost hidden orders are
just large orders on the bid or on the ask that are hidden from level
two so to give you an idea of how you may spot a hidden order
uh for example let's say that you see on the level two there's an order to buy
100 shares of a stock at five dollars however
because you're reading the tape and you're looking at the level two
in the time and sales at the same time over on the time and sales
you see thousands and thousands of shares being traded at five dollars
but that same 100 share bid at five dollars it's still there and hasn't
budged from level two in this example that tells you that
there is obviously somebody buying much more than a hundred shares
at five dollars even though they only want you to think there are 100 shares
being bought so you can use that information to
pretty safely assume that there is quite a bit of demand at five dollars
even though a lot of it is being hidden from level two
so if you're still a little bit confused bear with me for a moment because i have
a screen recording here that should actually clear some things up
um in this example we actually have a hidden seller so you're going to see on
the ask over on the right side of the level two
which can be found right over here you're going to see an order at 234
that's pretty small and at the same time over here on the
time it's sales you're going to see thousands and thousands of shares that
were traded at 234 with the same small order on the ask not
budging from the level two and in that case you can obviously
assume that there is somebody selling a lot more than they're showing
at 234 and all of that hidden supply is ultimately going to drive the stock's
price down so i'm going to go ahead and play this
screen recording here and uh we'll skim through it just to show you exactly what
we're looking for and exactly what i mean by
a hidden seller now right off the bat keep in mind that
234 is the price that we're going to see the hidden seller at
so you want to make sure that you're looking at the size of how many shares
are being sold at 234 and comparing it to how many shares are
actually being traded at 234 and right now we have 500 shares being
sold at 234 and we've already seen thousands and
thousands of shares that were traded just now
at 234 and playing this a little bit further you're going to see the same
thing continue to happen over and over until ultimately the selling takes over
and starts to push the price lower so we're seeing hundreds more already
briefly the stock price is breaking out above that 234
but it comes right back down below it and now we're actually going to see some
hidden selling take over
okay so right there again there's thousands of thousands of shares that
were already traded at 234 with still a very small order just being
placed at 234 so that should already tell you that
they're selling more than they're showing
and if we keep playing this you're going to see more and more shares again at 234
there's a couple hundred more a bunch more there and more and more and
more and we still have small orders over here on the 234 ask
a bunch more coming in at 2 34. so at this point if you're watching the
tape in real time you should be able to see that there is somebody definitely
selling a lot more than they want to show a 234
and if you happen to be in a long position at the time that would probably
be a red flag and would tell you that you want to get out of position
and either lock in your profits or cut your losses and if you were just
watching this and you didn't have any position
that would be a good indicator to actually go ahead and short sell
so you can profit from that supply and profit from the stock coming back down
in the future and if i go ahead and fast forward
through the rest of this recording you can see that the supply definitely
did take over and the stock pretty much faded all the way back down to
you know about two dollars per share after it was just trading in the 230s
not long ago
so i hope this video was helpful to you if you're someone that's brand new to
trading and you're just getting started with
level two in time and sales if you enjoyed please make sure to give
the video a like and subscribe to the channel so you don't miss out on future
videos and if you'd like to take your education
a step further and learn about day trading swing trading and even long-term
investing as well as have access to our exclusive
market resources in our trading chat room with over a
thousand active traders all of that can be found at my website master the market
which will be the first link down below in the description
anyway thanks again for watching i hope you enjoyed and good luck with your
trading
you