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To: Bald Man from Mars who wrote (2795)	1/23/1999 5:10:00 PM
From: Dale Baker	Read Replies (4) \| Respond to of 118717

Hi Bald Man, I didn't know you were hanging around here. I have been meaning to do something on Level 2 quotes so this is a good chance. First, on VRIO: Thanh, this is a high risk stock. In the long run - a couple of years - I expect it to do very well because it is running an Internet network with a business to business E-commerce focus. But it will swing up and down 30 - 50% each way. Strictly for speculative money. Right now I have CMGI, RNWK and VRIO as pure Internet plays. Together they make up 16% of my portfolio. Level 2 - this shows all the bids and asks represented for NASDAQ stocks. The simplest way to interpret it is how many shares of stock have been bid (want to buy stock) by MM's compared to how many are on offer (to sell). When there is more to sell than there are buyers, the stock price will usually go down. But not always. If WIND opens up at 42 with 17K shares on the bid and 28K on the ask, I wouldn't play it. OTOH, if it opens at 36 with 28K on the bid and only 12K on the ask, I would buy at the market price at the open and hold until I saw the numbers of sellers greater than the number of buyers. The other advantage with Level 2 - which is hard to explain without a picture - is the depth on the bid and the ask. Let's say WIND has 150K on the bid and 150K on the offer, a deadlock. On my Level 2 screen, I can see the bids and asks going down about 10 lines (10 different mm's show up on each side). At that point I would look at the depth on each side. If the best bid is 42 1/2 and the lowest bid I see is 41, then the price of WIND probably won't go down much even if there is a lot of selling. But if I look at the ask and see the best offer at 43 and the highest offer on my screen is 46, I figure WIND has a good chance to go up with enough buying. The 43 ask will be "taken out" (someone buys those shares) so we move up to the next ask at 43 1/4, then the next may be at 43 3/4, then 44 1/4, etc. The lack of MM's stacked up near the ask tells me they are ready to let the stock go higher for a while before they step in and sell. I should add that this picture can change every second as bids and asks are made, withdrawn or filled. MM's can also have more shares to buy or sell than they are representing on Level 2. That part of the game is still largely a mystery to me. I'm just a beginner with Level 2 but I find it fascinating. It is VITAL for daytrading; you will get killed without it. For position trading, it's not that essential except that you can be sure to get the best price. If a stock is bid at 8 x 8 3/8, I will look at Level 2 and see how much stock is on offer at 8 3/8. If it's a lot I may put in a limit order at 8 1/4. If there is just a bit, I will put my limit in at 8 3/8 to make sure that offer doesn't disappear before I get filled. A straight market order might only get filled at 8 1/2 if the MM decides to hit the 8 3/8 himself then sell me the shares at 8 1/2 to make an extra 1/8 on the deal. That probably isn't too clear. Sorry. Post more questions if you have them, Thanh.