How To Use Level 2 Market Data For Investment Research (Moomoo Free Data)
– What's going on you guys, welcome back to the channel. So in this video here today, we're gonna be talking
about something called Level 2 Market Data and how
you can potentially use this to get a leg up on other
investors out there by simply having access to more data that they simply may not have access to. Now, this video here guys
is sponsored by Moomoo, which is a commission free that offers free Level 2 market data. I've been working with the
Moomoo team over on my blog, Investing Simple.com
for the last six months.
So they approached me
about some sponsored videos on the channel and since
I've worked with them a lot, I trust them and I think
they are a good option for those looking for
more sophisticated data when it comes to trading. So that being said,
guys, let's get into it. Let's talk about what
is Level 2 market data, how it can be used and then
I'm gonna give you guys a live demo over on Moomoo, looking at some of this
Level 2 market data. Now real quick here, guys, I just have a few
disclaimers to make here. First of all, I am not
a financial advisor. This is not any sort of
financial advice here, and you should always do your
own due diligence and research above and beyond the information
covered in this video.
Also, this video here is for
entertainment purposes only. And I've mentioned this
in just about every video. I'm not gonna beat a dead horse here guys but keep an eye out for spam
and scam comments below. I'm never gonna ask you to
text me or send me money or get ahold of me on WhatsApp. So if you're seeing
anything like that, guys, that is a complete scam. And if you wanna make sure it's me look for that white check
mark next to my name and the subscriber account that matches the one on my channel. So starting off here guys,
what exactly is Moomoo? Well, Moomoo is an
advanced trading platform that offers access to
commission-free trading on stocks, options, and ETFs.
The company is based in the
Silicon Valley in California. However, Moomoo Inc is an
indirect wholly owned subsidiary of a larger company
called Futu Holdings Inc. This is a fully SEC
registered broker dealer that is a member of FINRA and SIPC. so it carries the same
exact SIPC insurance protecting your funds as any
other brokerage out there. Now, in terms of why people choose Moomoo over other options out there, it mostly comes down to
the data and the tools and the overall functionality of the app, because these days commission-free trading is pretty much available everywhere, so it comes down to the actual features that differentiate a lot of these apps.
Of course, a huge
benefit to Moomoo is that you get free Level 2 market
data and real time quotes and on others out there
oftentimes you have to pay a monthly subscription in order
to get access to this data. And I'm going tell you guys what that is, why you should know about it
and how to use it shortly. You also have access to advanced charting and research tools, as well
as customizable dashboards, you can trade stocks, ETFs options, and ATRs on foreign stocks
and they have a generous free stock incentive at the signup. So basically guys, if you use the sponsored link down below, it is not an affiliate link
but Moomoo is basically gonna hand you a bunch of
free stocks just for opening the account and putting
some money in there.
I got some free stocks myself
that I'm gonna show you shortly when we do the app demo. But if you decide that you
want to give Moomoo a shot after watching this video, make sure you use that
sponsored link down below to ensure that you're
getting all the free stocks that you are supposed to. So now let's get more into
this Level 2 market data that is provided for free over on Moomoo. So Moomoo offers members access to this Level 2 market data
and Level 2 market data shows an investor the order
book of a given stock, meaning that it highlights
the bid and the ask price by various market makers. So typically speaking, if you
go on a basic platform or app, and you're looking at the actual stock, you're gonna be given one
bid price and one ask price, which is pretty much a combination of all of the current individual
orders for individuals looking to buy and sell shares. Well, what Level 2
market data does for you is it breaks that out into
the individual order book, showing you exactly how many
chairs are looking to be traded and at what specific prices.
So it can give you this big
advantage here by giving you more insight into the
price action of a stock and it's a feature that most
platforms simply do not offer, or they charge a fee for this. These Level 2 quotes over
on Moomoo are in real time and refreshing every 0.3 seconds. So what we have here guys is in the past, this type of sophisticated advanced data would only be available to
people who paid a lot of money for expensive subscriptions,
or if you were a wall street investor or a hedge fund, but because of these new offering better and better features,
it has truly democratized the space and made it a
more level playing field. So using Moomoo, you
can begin getting access to some of that same
data that the hedge funds and the more advanced larger investors are using that many of your other friends may just simply not have if they're not using an app
that has Level 2 market data.
So we're gonna cover more about this, but first I wanna do a
quick crash course here on some vocab review, just because these are gonna
be some important terms. So first of all, what is
the bid and ask price? Well, the bid is simply
the maximum a buyer is willing to pay for a stock
similar to if you're placing a bid on something at an auction. Whereas the ask or referred
to as the offer is the minimum a seller is willing to sell a stock for.
Now the difference between
those two is called the spread. And that's basically the
difference between what people are looking to sell this thing for and what people are
looking to buy this for and the larger the spread the
less liquid a given stock is. So what tends to happen is
popular stocks like Apple, for example, would have
a very, very small spread because of the sheer volume
of trades being placed. But when you get into
thinly traded stocks, penny stocks, over the counter markets, there's not nearly as many
people looking to transact the stock so that spread
becomes wider and wider. And that's very important
because if you're doing a market order, which
is what most people do, that means that your order
could be filled anywhere between that spread. So even if you think you're
getting a good price for it, you could way over pay on
a stock or just basically end up getting in at a price way beyond what you thought you were getting in at. So that's why you have to understand, bid versus ask, understand spread, and 100% guys consider using limit orders.
If you are trading thinly traded stocks, just because it can be a total wild card in terms of the actual price your order is getting filled up. However, with that Level 2 market data, you get more insight into the order book, which could help you again, better set your pricing
on that limit order. Now, there is another entity
that comes into play here, and that is something
called a market maker.
And a market maker is
simply a firm or individual who provides liquidity to an exchange. So a market maker must constantly
quote a bid and ask price with a correlating volume of shares and without a market maker
investors who want to buy a given stock may not be able
to if there wasn't a seller. So a lot of people hate market makers. They say,
"What are they in here for? Why do we have this middleman?" But if you enjoy liquidity in the market, if you like the fact that
when you try to buy shares of a stock, typically you get them filled almost immediately. Well, that's exactly what the
market maker is doing for you.
If we didn't have a market maker, we would be having to trade
shares with each other. And if you're looking to
buy 500 shares of Apple, somebody else needs to be
ready to sell 500 shares. That could cause liquidity
issues in the market, a wider spread and overall just a lot of less desirable features. So even though the market
makers have been under scrutiny, it is still an important
component to our financial markets giving us that much needed liquidity. And also guys, the market
makers are not operating a charity here they do make
a small amount of money on the spread or the difference between that bid price and the ask price.
So just for example sake here, let's say a market maker is
currently quoting a bid of $10 and an ask of $10.05. This means they are willing
to buy a stock for $10 from prospective seller
and sell the same stock at %10.05 to a prospective buyer. The spread of 5 cents
is the profit per share that the market maker would receive. Now, the amount of money they make is not usually whole sense. It's usually fractions
of a penny per share. And then also a lot of
brokerages will get a kickback from these market makers for
sending orders their way. So that is something that does happen with a lot of commission-free brokerages, where they are sending your
orders to certain market makers, just because there is a way
for them to earn revenue and be able to offer
commission-free trading and other great services completely free.
So, now let's cover an example here of Level 2 market data, looking at Tesla stock over on Moomoo. So, first of all, if we take
a look at the order book here, we're taking a look at the bid price, and it's showing you
how many shares people are looking to trade at what given price. So looking right here, there was an order for a
bid price of a 100 shares at 712.22, there was one
for 43 shares at 712.11. And then I looked down here, 300 share order to buy at 711.71. So instead of just having
this overall bid price, that's basically a combination of all of the individual orders, it
breaks it out, and you can see, okay, there's a big order
here for someone trying to buy it, 711.71. Now, 300 shares, that's not
a massive buy order on Tesla.
But like, for example,
let's say you're looking at a given stock and
you see a massive order of like 10,000 shares that could be very insightful information
that you just wouldn't have access to if you don't
have Level 2 market data. So this right here is showing
you the number of shares shown in hundreds and the
first one is 10,000 shares. So actually, guys, you
would have to take that 100 and add two zeros because
it is shown in hundreds.
So that's not actually 100
shares that is 10,000 shares. And so that's not 43 shares
there, that is 4,300 shares. And this right here would be 200 shares showing you that actual order book. Now, to the left of that,
you have another column of numbers, and this is the
price of each bid ranked. So the top bid shows the maximum price a market maker is willing to buy and in this case, it is 712.22. And then on the left there, the symbol, ARCA, is showing
you the actual market maker who is facilitating those orders. Now, looking at the ask price, we see similar numbers as well. Right there on the far right, that is the number of
shares shown in hundreds. So for example, that
first one there says 44, but that's actually an order
for 4,400 shares of Tesla. Beyond that we have the
price of each ask ranked so the top ask shows the
minimum price a market maker is willing to sell for.
So in this case here, it's at 712.50. And then again, it shows ARCA,
which is the market maker in their ticker symbol shown. So that's what Level 2 market data is. That's how you find it, but
what do you do with this data? Here's how to use Level 2 market data. So what it's doing for you is
it's giving you a deeper level of insight into the pricing
action behind a given stock. So many platforms
specifically just show you the Level 1 market data, which is just the best bid and ask price at the current given
time it doesn't show you any of the other orders out there.
Level 2 typically shows
investors the top 10 to 15 bids and ask versus just the
top one of each of those two. So looking at the example
here on the right here, looking at Apple, the
bid and the ask price is fairly balanced. And I think that has mostly
to do with the fact that it's a very actively traded stock so it doesn't have much of a spread. This doesn't really mean
it's an indicator of positive or negative sentiment, but
looking at this example here guys, we can see
the order book, the bid, and the ask price, we can see
the best current bid and asks.
We can also see who the market
maker is, but beyond that, we can see about 15 or more other orders, that you wouldn't be able to see without that Level 2 market data. So this Level 2 market data
can provide excellent insight into the pricing action of a stock. It can help you understand
the spread better. It can help you to better
set limit orders in terms of executing orders on maybe
more thinly traded stocks, but it should not be the
only factor used when making an investment decision, that is because market makers
can use deceiving tactics such as hiding the order
volume or placing multiple bids instead of just one large one, if they want to disguise large, lots of purchasing or selling.
So that is kind of a
disappointing thing here that some of these market
makers are doing things that are a little bit deceiving. They're not illegal. They're just deceiving in order
to kind of disguise things or maybe call attention to them. So it's another tool in the toolbox, but Level 2 market data is
not the only tool out there. There's no one tool out
there that you need to use all the time and that's
always gonna show you what to invest in. There's always risks involved,
no matter what you look at, but I'm simply just
showing you tools out there that you can take advantage
of to give you potentially a leg up on other people
and other investors. Also guys, this Level 2
market data is helpful to identify resistance and
support areas of a given stock. And so if you're into
technical analysis at all, that is a very important
factor to consider as well.
So now we're gonna jump into a live demo over on the Moomoo app, and I'm gonna buy $100
worth of a given stock. And we're gonna look at
the Level 2 market data, to peak at the order book
and try to gain some insights into the price action. All right, guys, so here we
are inside of my Moomoo account and what I'm gonna show you how to do here is how to purchase $100 worth of stocks and how we're actually
going to take a peak at that Level 2 market data, to get a better idea of the information that this provides us. Now, obviously guys
looking at the Moomoo app, there's tons of different features here, and we're not gonna cover
much of it in this video, but I recently did a
full review and tutorial on the Moomoo investing app.
So if you guys wanna check that out, that's gonna be up in
the card in the corner for your viewing pleasure. So what we're gonna do here, guys, we're gonna be buying $100
worth of my favorite stock right now, which is of course
Genius Brands International. So let's go ahead and click on that here and we're gonna start off by looking at that Level 2 market data. So right off the bat, we
can look at the chart here and get a general idea
for the price action of this stock today. So it opened up lower and
then it shot up positive and now it's kind of came
back towards the middle of where the close was yesterday. So it's actually sort of a
day representing indecision and Genius Brands
actually just bounced off that 200 simple moving average. So showing in decision
makes a lot of sense, given the potential here for
hopefully a trend reversal.
But beyond that, guys,
let's scroll down here and actually take a look at the order book going on here with Genius Brands. Now, as we said earlier,
these are in hundreds. So if you add two zeros, that's gonna be the actual orders here. The market maker is ARCA
and we can take a look here at the bid and the ask price. So right now, the current
best bid and best ask is 165 to 166 as the spread. And that's actually the identical price for all of the other
orders here in the book. But for example, we can see here that there's some larger orders. For example, on the bid side, you're seeing a bid for 2,500 shares. What I like to do also is just
take a quick glance at this and look at, okay, is
there more purchasing, is there more bid volume here, larger orders on the bid side or is there a larger
orders on the ask side? So for example, we see a
$2,500 bid price at $65.
And on the other side that we
see nothing close to 2,500, the highest we see is 1900. So that is where you could also
potentially draw conclusions of sentiment looking at the bid
orders versus the ask orders and whether or not we're
seeing more bids or more asks. That's just another idea or
general way to figure out potentially where you're
gonna see some price movement, because at the end of the day,
the reason a stock goes up is because of that supply
and demand component.
So if there's a lot more
people bidding on shares and not too many people
looking to part ways with them that is going to be spelled out, or that's gonna be playing
out here in the order book, you'll be able to see
it with more bid orders and less ask orders and that would result in a price increase due to that demand. So that's how that works here, guys. What we're gonna do now
is purchase $100 worth of Genius Brands. So we're gonna click on
the orange trade button and then we're gonna do a market order because we want this
order to fill immediately. And in terms of the quantity here, we're just going to do
somewhere close to a 100 shares. So let's just start off with
like 55 that puts us at 90,75 so maybe we'll do 58, 59. Let's try 60 shares.
That's $99. And we're looking to have
this be a day only order. So if you wanted to also cancel the order, you could do that.
But with a market order,
that's totally irrelevant because a market order is
gonna fill instantaneously. So now I'm gonna go ahead
and put my password in to unlock trading to make this purchase. So we're all unlocked here, guys. Now I'm gonna invest this
$99 into Genius Brands. And literally all I do is
click on the buy button and just like that the order was submitted and the order was filled. So I just purchased 60 shares of GNUS. And if we go over here, you can see there were
some other buy orders I placed for demonstration purposes, but if we back up here
to my overall account and go to positions, we
can now see that I own Genius Brands International
as well as Sirius XM Holdings. So anyways, guys, that is how you can
use Level 2 market data to get more insight
behind the price action. And if you simply do
not want to pay for it, you can use the commission-free
trading app known as Moomoo to get free access to Level 2 market data in real time.
Beyond that, guys, if you wanna get a bunch of free stocks, Moomoo has that sponsored link down below. If you use that link, you're gonna get the
most possible free shares just for opening and
funding a brokerage account. So that's gonna wrap up
this video here, guys. Thank you so much for tuning in, make sure you drop a like and
subscribe if you're new here, hit that bell for future notifications. And as always guys, I hope
to see you in the next video..
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