Level II part 2
< TheSlayer > so if you see a + next to the number
< TheSlayer > that means that mm has RAISED their bid
< TheSlayer > from the last time they made bid
< TheSlayer > let me put it this way
< TheSlayer > if you own the stock, you want to see
lots of +'s
< TheSlayer > not lots of -'s
< TheSlayer > lol
< TheSlayer > meaning the bids are going up and not
down
< TheSlayer > ok, on to the next column
< TheSlayer > this is the share columh
< TheSlayer > again, your L2 may be different than mine
< TheSlayer > but mine is the coolest, so just bear
with me )
< TheSlayer > this column shows the amount of the bid
< TheSlayer > NOT the PRICE of the bid
< TheSlayer > but the number of SHARES at that price
that we just discussed in the previous column
< TheSlayer > (I use Q charts at Quote.com)
< TheSlayer > so, in my VERT example
< TheSlayer > I see a 100 next to the 113 1/8 in the
top horizontal column
< TheSlayer > this means, ta da, that SLKC
< rubyrubej > isnot it beter do use l2 that is
incoorpatae with your oder entry system?
< TheSlayer > is willing to buy 100 shares of VERT at
113 1/8
< TheSlayer > RubyRubeJ, no, not particularly
< TheSlayer > now, next to each bid you will have a
similar number
< TheSlayer > ranging from 100 on up
< TheSlayer > always in numbers divisible by 100
< bishko > don't you add two zeros to tha 100?
< TheSlayer > bishko, it depends on your system
< TheSlayer > on mine, no
< TheSlayer > on yours, perhaps
< TheSlayer > I think theirs you do
< TheSlayer > so you would have 1 x 100
< TheSlayer > but I find that to be a STUPID SYSTEM
< TheSlayer > better to just see 100
< TheSlayer > when 100 is what they mean
< TheSlayer > screw tradition
< TheSlayer > from the days of the abacus
< TheSlayer > ok
< TheSlayer > now the share column is ultra-important
< TheSlayer > probably the most important of them all
< TheSlayer > because that shows you the strength of
the bid
< TheSlayer > if you own the stock, you want REALLY BIG
NUMBERS here
< TheSlayer > like, lots of 10,000's
< TheSlayer > and stuff like that
< TheSlayer > unfortunately for VERT, there is only 100
there
< TheSlayer > but that is ok
< TheSlayer > because that is normal during off hours
< TheSlayer > you don't see lots of big limit orders
left overnight
< TheSlayer > for a whole variety of reasons
< TheSlayer > that are totally unimportant
< TheSlayer > anyway, so the bigger the numbers, the
better
< TheSlayer > and if you have a lot of bids at a
certain price
< TheSlayer > and lots of big numbers
< TheSlayer > this forms support
< TheSlayer > at that level
< TheSlayer > support also occurs if the bids are
around the same level
< TheSlayer > so you can get support around 113, for
example
< TheSlayer > if you have big bids at, say, 113 1/8,
113 1/16, and at 113 itself
< TheSlayer > this is what you ideally want to see if
your stock is falling
< TheSlayer > a nice deep level of support
< TheSlayer > that your stock is likely to bounce off
of
< TheSlayer > as the shorts get discouraged and think
to themselves
< TheSlayer > gee, all those big bids, it'll never get
through them
< TheSlayer > I better COVER MY ASS NOW
< TheSlayer > hehehehe
< TheSlayer > and this starts the price back up again
< TheSlayer > and buyers see this
< TheSlayer > and momo daytraders see this
< TheSlayer > and the stock shoots up off the support
level
< TheSlayer > and you make a quick 1/2 point
< TheSlayer > if you are nimble
< TheSlayer > which I am sure all of you are
< TheSlayer > of course, then you have to remember to
sell at 1/2
< TheSlayer > and not be a schmuck who doesn't sell
< TheSlayer > and watches the damn thing fall back to
the support level
< TheSlayer > and this time crash through it
< TheSlayer > and then come whining, "But TM said it
was a good two-week hold"
< TheSlayer > this is where trading experience comes
into play
< TheSlayer > there is also a phenomenon called phony
bids
< TheSlayer > these are games mm's play
< TheSlayer > to CREATE the kind of bounce I just
described
< TheSlayer > because they know what the sellers and
the shorts are thinking
< TheSlayer > when they see a big support level
< TheSlayer > like with DELL, 100000 shares at 80 at
one point
< TheSlayer > DELL jumped off 80 like 10 times because
of that
< TheSlayer > finally, though the sellers won
< TheSlayer > and lo and behold, lots of the bids just
vanished
< TheSlayer > poof!
< TheSlayer > and finally the price just crashed on
through
< TheSlayer > like it was a tissue thin layer
< TheSlayer > rather than the Maginot line it had
appeared to be
< TheSlayer > this is known as phony bids
< TheSlayer > hard to tell the difference
< TheSlayer > but knowing whether a bounce off that
level has already occurred
< TheSlayer > tells you a lot
< TheSlayer > about what you should do
< TheSlayer > because phony bids usually disappear
< TheSlayer > after they work once or twice
< TheSlayer > and that is when the support level is
breached
< TheSlayer > so you have to know the history of that
support level
< TheSlayer > and not just its size
< TheSlayer > ok, the only other column in my level 2
< TheSlayer > is the time column
< TheSlayer > that is pretty meaningless
< TheSlayer > unless you are a total L2 junkie
< TheSlayer > because that shows which bids
< rubyrubej > how do u go about knowing the history of
the support level?
< TheSlayer > at a given bid level
< TheSlayer > will be honored first
< TheSlayer > first come first served
< TheSlayer > usually
< TheSlayer > but not always
< TheSlayer > Ruby, you have to follow the stock
closely
< TheSlayer > or look at the chart closely
< TheSlayer > a 1 minute chart
< TheSlayer > usually works for that
< TheSlayer > but really, it becomes a feel thing
< TheSlayer > how hard the bounce is
< TheSlayer > whether it sustains its momentum
< TheSlayer > stuff like that
< TheSlayer > Now, by this time you should have figured
out
< TheSlayer > that the ask side is exactly like the bid
side
< TheSlayer > but in reverse
< TheSlayer > but all the same conventions apply
< TheSlayer > this time, the colors indicate higher
asks
< TheSlayer > rather than the lower bids
< TheSlayer > for the same reason
< TheSlayer > buyers want to deal with the lowest ones
first
< TheSlayer > so they go to the top
< TheSlayer > being the most desirable
< TheSlayer > and everything else works just like with
the bids
< TheSlayer > if you are long, you want to see small
numbers of askers
< TheSlayer > and you want to see them get smaller
< TheSlayer > as you watch them
< TheSlayer > 'cuz that suggests that the ask is about
to be raised
< TheSlayer > and your stock price will go up
< TheSlayer > which is what you want
< TheSlayer > now, all this explaining
< TheSlayer > of what each column means is fine
< TheSlayer > but it is just the beginning
< TheSlayer > because the dynamic aspect is what
matters
< TheSlayer > in fact, the dynamic aspect tells the
whole story
< TheSlayer > by dynamic, I mean the changes that occur
< TheSlayer > in each column, the bid side and the ask
side
< TheSlayer > over time
< TheSlayer > and here the colors are vital
< TheSlayer > because they show the changes in strength
very clearly
< TheSlayer > and the change is what interests us
< TheSlayer > NOT the siz
< TheSlayer > size
< TheSlayer > because the change in size show the
DIRECTION
< TheSlayer > and the direction of the stock is what
matters
< TheSlayer > so say you have a huge ask at 113 1/4 in
VERT
< TheSlayer > (which you don't, but just suppose)
< TheSlayer > you look at it and say
< TheSlayer > gee, that is a big sucker
< TheSlayer > the stock will never get through that
< TheSlayer > I better sell
< TheSlayer > but wait a minute
< TheSlayer > it is NOT the size of the ask that
matters
< TheSlayer > but rather the CHANGE in the size of the
aks
< TheSlayer > aks
< TheSlayer > ask god damn it
< TheSlayer > that matters
< TheSlayer > because, as I said
< TheSlayer > change in size shows direction
< TheSlayer > and direction is all we care about
< TheSlayer > so you could have a huge ask
< TheSlayer > but watch it for a bit
< TheSlayer > and you may see it gradually grow smaller
< TheSlayer > the 10,000 ask becomes 9,000
< TheSlayer > then 6,000
< TheSlayer > then 3,000
< TheSlayer > at this point, it doesn't matter how big
the bid side is
< TheSlayer > at this rate, the sucker is going to go
up
< TheSlayer > 9 times out of tem
< TheSlayer > ten
< TheSlayer > no matter how small the bid side appears
to be
< TheSlayer > why?
< TheSlayer > because there must be a ton of market
orders
< TheSlayer > or something
< TheSlayer > chipping away at that ask
< TheSlayer > and eventually they will likely chip
right on through
< TheSlayer > and that is a fabulous time to buy a
stock
< TheSlayer > because when you have a big resistance
level
< TheSlayer > big asks at a certain price
< TheSlayer > and that holds for a while
< TheSlayer > but then suddenly starts to diminish
< TheSlayer > buckle on your seat belts baby
< TheSlayer > 'cuz you are going for a ride
< TheSlayer > now, those with a good memory
< TheSlayer > may remember a stock last week
< TheSlayer > called RRRR
< TheSlayer > RRRRRRRRRRRR
< TheSlayer > whatever
< TheSlayer > that freaking stock was banging away at
15 1/4
< TheSlayer > all day
< TheSlayer > and couldn't get through
< TheSlayer > wouldn't budge
< TheSlayer > nice, big ask at 15 1/4
< TheSlayer > nothing humongous, but a couple of blocks
< TheSlayer > like 5,000 shares and such
< TheSlayer > just enough to keep it down
< TheSlayer > so anyway, that resistance level held
< TheSlayer > and it held
< TheSlayer > and it held
< TheSlayer > and then a funny thing happened
< TheSlayer > on about the tenth time that the stock
price got to it
< TheSlayer > the ask started to diminish
< TheSlayer > not all at once
< TheSlayer > but one of the,say, 5,000 asks became
like 4000
< TheSlayer > then 3500
< TheSlayer > then 2000
< TheSlayer > then like a few chunks of 100's or
whatever
< TheSlayer > at that point, even an idiot
< TheSlayer > could look and say
< TheSlayer > this baby is going through finally
< TheSlayer > and the thing was
< TheSlayer > the stock had been banging at that
freaking level for hours
< TheSlayer > so there was all sorts of pent-up demand
< TheSlayer > because that resistance level
< TheSlayer > had in essence artificially held down the
stock
< TheSlayer > it's like if there was one old kook out
there
< TheSlayer > and he said to himself
< TheSlayer > "God damn it, I don't care what those
daytraders want"
< TheSlayer > "freaking RRRR is not going to 20 today"
< TheSlayer > well, the old koot finally runs out of
money and shares
< TheSlayer > and guess what happens
< TheSlayer > the stock seeks its own natural level
< TheSlayer > which is, of course, higher than 15 1/4
< TheSlayer > and then a funny thing happens
< TheSlayer > people start to notice that this stock
has broken through
< TheSlayer > so they climb on
< TheSlayer > 'cuz they are smart SA types
< TheSlayer > and the buy orders pile up
< TheSlayer > just like after a TM call
< TheSlayer > and before you knew it
< TheSlayer > the price was at $20
< TheSlayer > which it had no right getting ot
< TheSlayer > to
< TheSlayer > but the articial suppression
< TheSlayer > caused a price explosion after it fell
< TheSlayer > so, support and resistance levels
< TheSlayer > are absolutely vital to see on L2
< TheSlayer > because they demonstrate not just what
the stock will bounce off of
< TheSlayer > but they also indicate
< TheSlayer > areas where, when breached
< TheSlayer > the stock can really run
< TheSlayer > and that is what you want to find
< TheSlayer > a stock that will run
< TheSlayer > and, needless to say,
< TheSlayer > perhaps
< TheSlayer > if you own a stock
< TheSlayer > and it has been held up by a support
level
< TheSlayer > usually a round figure, like 10
< TheSlayer > and you see that support level
< TheSlayer > suddenly start to crumble
< TheSlayer > you better have the common sense to GET
OUT
< TheSlayer > GET OUT NOW
< TheSlayer > because once that support level goes
< TheSlayer > the damn thing could really dive on you
< TheSlayer > though it may not
< TheSlayer > depending on the dynamics of the
situation
< TheSlayer > so the dynamics are the key
< TheSlayer > not the actual numbers you see on L2
< TheSlayer > thought those are important for various
reasons, too
< TheSlayer > showing you in advance where bounces may
occur
< TheSlayer > and good selling points lie
< TheSlayer > so I hope this has been useful
< TheSlayer > and I bid you good night
< VEA > brb,this is great stuff keep going im learning
so much tonight slayer
< LLama2 > thanks
< sowen246 > Great info, Slayer, thanks!
< Toga > bravo, slayer
< sanjay > is this logged ? thanks.
< stub > Thanks, slayer GREAT!!!
< ddd > thanks slayer
< bills > great job thanks
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