What Is Market Depth Level 2 in Futures Trading?
Market Depth Level 2 provides a detailed view of the order book in futures trading, showing the number of contracts available at different price levels. This data offers a deeper look into liquidity, allowing traders to gauge market supply and demand.
How Is Level 2 Data Used in Futures Trading?
Level 2 data helps traders identify the depth of supply and demand at various price levels. By observing where large orders are being placed, traders can anticipate potential price movements, which can inform decisions about when to enter or exit trades.
How Does Level 2 Differ from Level 1 Data?
While Level 1 data gives basic information, like the highest bid and lowest ask prices, Level 2 data goes further, offering a full breakdown of the order book. It displays the number of contracts bid and offered at each price level, providing more detailed insights into liquidity.
Benefits of Market Depth Level 2
Enhanced Transparency: Traders gain a clear view of the market’s liquidity and supply and demand at various price points.
Informed Trading Decisions: Level 2 helps predict price movements by showing where large orders are placed, making it easier to determine trade entries and exits.
Understanding Liquidity: By showing the depth of the market at different levels, traders can better manage risk and develop trading strategies.
Limitations of Market Depth Level 2
While useful, Level 2 data doesn’t show the full picture of the market. It only reflects orders placed and not every contract that might be traded, making it necessary to use other trading tools alongside Level 2.
How to Access Market Depth Level 2 for ETF
You can purchase Market Depth Level 2 data directly from your Trader Dashboard. It is a one-time purchase that grants access for the specific month in which it’s bought, valid from the first to the last day of that month.