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Difference Between Level 1 and Level 2 Stock Quotes

January 03, 20243 min read

Up to 95% of day traders lose money in the stock market. 

Yet many smart traders reduce their risk by performing due diligence before they place a buy.

For instance, Level 1 and Level 2 stock quotes are both trading screens that give you insight into a particular stock. 

Want to know the difference between a Level 1 and Level 2 stock quotes and how they can help traders make more intelligent purchases? Keep reading for the answer to that question and more.

Similarities between Level 1 and Level 2 Stock Quotes

While there are some serious differences between the two types of trading screens, there are a few similarities. 

For instance, a stock's latest trading price as well as it's current "buy it now" and "sell it now" price can be found on both Level 1 and Level 2 spreads. The latter two prices are usually referred to as the ask and bid price, respectively. Keep these terms in mind for later in this article.

A trader can also find a stock's daily high and low trading prices. Finally, both Level 1 and 2 quotes will show you the trading volume, or how much a stock has been trading within a designated period of time.

Differences Between Level 1 and Level 2 

The true difference between Level 1 and 2 is the depth of the latter screen. With a Level 2 quote, you can get more in-depth information about the market, liquidity, and bid and ask price for a particular stock.

Market Information

With a Level 1 quote, traders can only examine general purchase interest. Specifically, you'll find the number of buyers and sellers who have ordered the stock at its current price.

On the other hand, Level 2 quotes show much, much more. Traders will not only find the number of buyers and sellers at the current price. They'll also find the number of buyers and sellers at each and every price Level.

Why does this matter? Traders can evaluate the market pressure of the stock. In other words, a trader can determine if there is more buying or selling happening.

Bid and Ask Price

A Level 1 quote shows the bid and ask price on a trade at the current price. This is sometimes the whole purpose of examining the Level 1 screen.

Meanwhile, a Level 2 will show the bid and ask spread for each and every price level. Knowing the spread at every price level helps traders determine the spread before the trade is ever placed, protecting their investment.

Stock Liquidity

Finally, Level 1 and 2 quotes differ in the information they give on a particular stock's liquidity. The former shows a trade's buy and sell orders while the latter presents how many orders are queued up.

This information is vital for showing how fast or slow traders are placing new requests for a particular stock.

Worries About Level 2 Stock Quotes

Level 2 stock quotes can give traders a wealth of information. However, be wary that these screens don't always show the entire market depth. Market makers are constantly inputting and canceling orders. Be sure to consult a secondary pricing resource before getting involved in a new stock.

Identified the perfect trade but don't have the funds to get in on it? Contact Stock Loans to learn how to tap into your securities without waiting for capital. 


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