How I Uses eSignal, Level II and ECN Market Data to Day Trade
To be a successful trader in this market, you need to have the right tools. One of the most important, in my opinion, is a Level II window. Level II controls the whole market; it influences charts, time & sales, indicators and Top (or Hot) Lists. The reason the Level II (Market Depth) window is so important is because it also allows you to see the Electronic Communication Networks (ECNs), the Market Makers (brokerage firms), the price at which they want to buy or sell a share and much more. In other words, without knowing how to trade with Level II, you’re trading blind!
I use Level II as the key to my main day trading strategy. Once I find a stock to trade, I look for the Market Maker trading that stock. That’s what makes Level II data so important to me. Level II is what I use to see what the ECNs are doing (ECNs are more important than the Market Makers because the Market Makers are also using the ECNs) to see the big block trades. I then use the Market Maker orders on the level IIs to confirm the support and resistance levels on my charts.
The great advantage of having an eSignal platform is that it offers the Market Depth window with Level II and ECN quotes, allowing me to see the Market Makers, so I can shadow them on the bid and ask, and also see those ECN big block orders. I am one of the original day traders from the early 1990s and have been using Level II since I started, more than 16 years ago.
Because I know how important it is to use the Level II window and how to strategize with it, I try to share this knowledge with my students at Cyber Trading University. Many new traders don’t understand the importance of the Level II window, so, as I teach them, I try to show them how, without Level II data, they are in for a lot of unwelcome surprises.