My Day Trading system in a nutshell (Part 6) - NDX and Level II

Now, let's talk about Level II ...

=> Critical tool, displays a partial order book for a given stock, i.e. the best Bids and Asks.

How to use it?
Check the spread (difference between Bids and Asks): if too high, you run the risk to never fill it. You also want to make sure that there is enough supply and demand so as not to get too high a slippage.
Assess the market: you can see where other traders stand, their aggressiveness; how are they willing to buy or sell, and for how much.
Support and Resistance: high number of orders for one same price level indicates a S or R.

To sum it up, LEVEL II helps you:

Create the break-through YOURSELF …
Time your entry


On the picture above:

• you can see a Support (in Yellow), as there are quite many Bidders at 52.08, compared to the other price levels. That can only comfort you in proceeding to Buy – provided, of course, that all your indicators agree.
• the Ask is at 52.10. If you buy 1 lot, the next Ask will be 52.11. Therefore, thanks to your bid, the price goes higher – allowing you to sell at a better value. You make things happen! Now, imagine that 52.10 had been a Resistance … In that case, you break out of the Resistance. The price will be freed from that “ceiling” and able to move up sharply in the direction you are seeking.

More on the "Perfect Trade" very soon!

Good trading to all,

Mark