What is the benefit of L2 data when running a strategy on Market Replay?
Quick question in regards to L2 Data. What is the difference between L1 and L2, and what is the benefit of having both specific to testing strategies on Market Replay? Any and all help would be appreciated.
This post has been selected as an answer to the original posters question
L1 data is just the price and volume data that is normally available. L2 data is the resting orders you see above and below price on your DOM. I believe trades-at-bid and trades-at-ask data is considered l2 data also.
L2 data would mainly make a difference to you when testing a strategy on market replay if the strategy you are running specifically makes use of level 2 data. According to this post on ninja forums, it looks like having level 2 data can also make a difference to NT's fill algorithm.
Last edited by GoldStandard; December 12th, 2010 at 06:04 PM.
Reason: discovered i was wrong and changed to correct answer
NT does have a sophisticated sim engine which tries to take into account your position in the queue, and would therefore need L2/Depth of Market to do that.
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One thing to bear in mind when doing replay and L1+2 is that they are only synced to the second, so although each will be in the correct order, within each second L1 and L2 can be mixed up with respect to each other.
Its somewhere on their site... Someone was complaining about how they get filled after 100 cars on the ES when there was a order for 1500 to get filled first, or something of that nature. I personally traded through market replay, and i agree its easier to get fills. During regular trading on sim, its much harder.
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