Day Trade Warrior: Advanced Level2 Techniques [PDF]

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Day Trade Warrior Advanced Level2 Techniques

Advanced Level 2  Learn

to read the Level 2 and understand buy and sell signals.  Studying Level 2 can be good for scalping and finding quick entries and exits.  Level 2 can show us where retail buyers and sellers are lining up.

Chart Reading vs Level 2  Level

2 is really important, but it doesn’t override chart reading.  As pattern based traders our first focus is finding good patterns.

Reading Level 2 Bid Support Concepts Showing “Fake” Orders Showing Resistance Looking at Market Depth

Time & Sales Watch the order flow in the Time & Sales Large orders indicate Retail Interest Orders in Green are at the ASK price Orders in White are in between BID/ASK Orders in Red are at the BID price

Time & Sales tips  Pauses

in Time & Sales are usually a bearish signal for me  A Heavy ASK at a key level of resistance confirms that the resistance is real. Look for the shares to get bought and then a quick breakout over that price  Breakout Trading at key Price Points requires Time & Sales and Level 2

How to Hide Shares  Using

ARCA you have to display 10% of your actual size. If you have 100k shares you can show 10k.  If you are selling a thinly traded stock, you may want to hide your shares to not scare away buyers

Market Manipulation  Some

traders will place extremely large orders without the intention of having them executed.  A “fake” buy order on the bid of 200k shares could make retail traders think there are big buyers.  In reality, that order will probably be canceled before it is filled

Institutional Traders  Institutional

buyers may not be represented fully in Level 2  This is one of the reasons some traders believe focusing on Supply and Demand areas on the chart is more important than using level 2.

How to Identify Institutional Trades  Intuitional

trades that are executed by an algo/computer are typically 100 share blocks.  These orders fire off rapidly and can deceive traders into thinking there are buyers/sellers.  These trades do not necessarily represent retail traders

Low Volume Stocks Big Spreads are common on Low Volume Stocks

Direct Access Routing  Send

your orders directly to the market maker displaying shares available on the ASK or BID for the quickest fills.  Super Smart orders in Lightspeed will send orders to multiple routes and gives you partial fills from all of them until your shares are gone. The cost is higher, but execution speeds and fill times are excellent

Dark Pools  Dark

Pools are where institutional traders place their transactions  These “pools” of shares are not available to retail traders  This means when a retail traders places a buy or sell order, we won’t get access to those shares.  Some Brokers allow Dark Pool Routing

Direct Access Routing

Adding / Removing Liquidity  Adding

Liquidity to the Market means you are adding shares that can be bought or sold. This would be any order that is not immediately “marketable” or filled when it’s placed  By Adding Liquidity to the Market, many Market Makers will give you ECN Rebates  When you Remove Liquidity you may get charged an ECN Fee.

Adding Liquidity  Adding

Liquidity to the Market means you are improving market liquidity by adding shares.  This would be considered ANY order that is not immediately Marketable.  When you Add Liquidity, you get PAID ECN rebates. ARCA pays .005  This means if I sell 10k shares on the Ask ARCA will pay me $50.00

Removing Liquidity  When

you place a market order, you are taking liquidity away from the market.  Some brokers will charge you an ECN fee for this. It may be anywhere from .0025.01  This can be costly, but is the price to get fast executions with direct market routing

Extras & Links  Email

me with questions [email protected]