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Of course, wallowing in this kind of minutiae is not for everybody. You must be willing to narrow your focus to changing colors on a screen without getting bored at watching flashing numbers. I found the flow of numbers captivating, especially as I began to understand more of what they meant. |
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For those who are more active traders and need to be on a par with other traders, it is crucial to have this information. If you don't, you will be at a huge disadvantage, since most other serious day and swing traders will be monitoring Level II quotes closely. |
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In the game of day trading or active position trading, you need to have all the data available to compete. You need, in some ways, to think like a long-term investor. You need to know the sector of the company you are trading and the particular stock inside and out. You need to know every bit of news about it, the fundamentals and technicals, and its daily patterns. |
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You need to become an expert in that one stock and make it such a part of your psyche that you even dream about it at night! You can be sure the market makers are doing nothing less than this. And if you're going to compete against them, you have to take it as seriously as they do. Anything less, and you are likely to lose your shirt. And even with this dedication, you will still be at least a step behind the big-league professionals. If you don't believe this, you are fooling yourself. |
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Good day traders, in this way, are thinking like long-term investors. They are doing the research they need to do. They are becoming more professional in their approach. We will get into this theme of what "investor's-mind" has to offer traders in Chapter 9. The days of 20-somethings playing momentum stocks they don't even know the names of are coming to an end. It may work for a while in a fast market but, over time, the market will rob them of their money and slit their emotional throats. |
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So trying to compete against the market with anything less than Level II is impossible. Viewing Level II is like being able to see what's coming around the bend before it actually appears. Because you can see how many market makers are lining up at what prices (and with how much stock) to buy and sell, you have a window on exactly which way the stock is headed. |
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One simple way to use this information is when I can comfortably put in a market order to buy at a certain price and can see that there is plenty of stock for sale at that price. In other words, I see that there are a number of market makers lined up offering stock at my price. |
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