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Can you see how you can use level II to time your entry or exit moves? As the price nears your target, can you see how to use the supply and demand information and the rotation clues on level II to anticipate when your target price will be hit? |
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Can you see that if you can successfully anticipate that price move you have a better chance of moving quickly and getting the execution at the price you want? |
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Find Where the Best Price and the Most Liquidity Are |
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Here are the steps you will go through with level II: |
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That's not hardjust look at the window. The best bid and the best offer are at the top of the window! |
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This one gets hard in a hurry! Remember that the market makers hide their real liquidity. |
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We know this is the third or fourth time we've mentioned this and you're probably getting tired of hearing about it. But, when you want to unload 2,500 shares of QCOM while its price is dropping about 5 points every 10 seconds, liquidity will suddenly become very important to youand to your children's educational plans! |
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So, how do you find the liquidity? |
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Remember the Nasdaq Web site; it holds good clues. Before you get into a good-sized position, take just a few minutes to go to that site and figure out who the three or four biggest market makers in your stock are. |
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Look at the ECNs on the level II display: Who is showing the most size? |
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Alwaysand we really do mean alwayslook at INCA (Instinet), ISLD (Island), NITE, and GSCO. These four are generally big players in most stocks. |
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Execute the Right Type of Order |
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Once you have your price, and have determined where the liquidity is, you have four ways to execute orders on Nasdaq stocks: |
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1. SOES (Small Order Execution System). This is a Nasdaq execution method that automates execution at the inside market price: |
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