Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
What is th diff between L1 and L2, and do I need L2?
I wouldn't say its outdated; rather is a tad more 'general' these days as opposed to the specific definitions we had 2 decades ago. From a programmatic/API implementation perspective, I do agree with your definitions table above though
For many years, L2 was 'somewhat standardised' to be 5 or 10 levels.
It was the exchanges offering more data services, and then ECN's & data providers that started changing definitions around what L2 offers (MBO, MBP), and then coining terms as L3 and more (which actually goes far deeper) which caused some minor confusion.
In simple terms:
L1 = Top of Book
L2 = Typically 5-10 levels depending on provider (in some cases i.e Rithmic, much more). MBP
L3 = All above, MBO + much more (all individual orders, messages, fill probability and fill rates, queue dynamics, rest times). Many are also now customisable, and I've used one provider that offers predictive queue analytics/capability.
Again, some providers have skewed L2 a little by merging what was traditionally L3 into the L2 space. But for the most part, the definitions above are what most industry professionals refer to and know of.
Trading off from a chart or using technical analysis with it to place entries and exits, you won't need Level 2 market data since Level 1-aka-Top of Book provided free by your brokerage firm is good enough. In case your taking the less travelled road, ie. learning Order Flow (also called Depth of Market-DOM or price ladder), then yes ... you need subscribe to Level 2 data and pay a monthly fee for it.
answering to earlyrun's question, all platforms i know require level 2 data in order to display a footprint chart. If you can be resourceful you may find a workaround to that, but i don't think it would be worth your time given that l2 data doesn't even cost that much
Level 2 is not required to display the footprint tool. With Ninjatrader for example, just top of the book aka L1 data is necessary. It is logical since the footprint uses executed orders not advertised orders which belong to level II data.