Investing Trading Day Trading Description of Order Book, Level I and II Market Data Learn the Difference Between Market Data Feeds By Adam Milton Adam Milton Adam Milton is a professional financial trader who specializes in writing and curating content about commodities markets and trading strategies. Through both his writing and his daily duties in trading, Adam helps retail investors understand day trading. As the principal DAX stock index trader for Patrick Marne Investment Management AG, Adam has been a full-time financial trader for several years, trading European, U.S., and Asian markets five days a week. He has experience analyzing various financial markets, and creating new trading techniques and trading systems for scalping, day, swing, and position trading. learn about our editorial policies Updated on February 13, 2022 Reviewed by Gordon Scott Reviewed by Gordon Scott Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician (CMT). He is also a member of CMT Association. learn about our financial review board Fact checked by Aaron Johnson Fact checked by Aaron Johnson Aaron Johnson is a researcher and qualitative data/media analyst with over five years of experience obtaining, parsing, and communicating data to various audiences. He received a Master of Science in Social Anthropology from The University of Edinburgh, one of the top-20 universities in the world, where he focused on the study of emerging media. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article Level 1 Market Data Level II Market Data Data Availability and Pricing Frequently Asked Questions (FAQs) Market depth is created by traders bidding and offering to buy or sell. Photo: Jonathan Kim/Getty Images Among the tools day traders use to make their trading decisions are various types of market data, commonly referred to as "Level I and Level II market data." This market data includes information about current prices and recently completed trades. Level II data provides more information than Level I. Traders decide which data feed they require for their trading, then subscribe to that data feed through their broker. Depending on the broker, Level I and Level II may have different costs associated with them. It's important to be aware of the differences in data feeds, so you aren't paying for something you don't need. Key Takeaways Market data feeds provide day traders with current stock prices and recent trades in order books that are sorted into Level I and Level II data.Market data is provided by the exchange that's offering the market. Day traders can get its order books from their brokerages.Level I market data includes basic information and is generally sufficient for most chart-based data systems.Level II market data is more complex, because it shows all bids and offers, not just the highest. Level 1 Market Data Basic market data is known as Level I data. Level I market data provides all of the information needed to trade most chart-based trading systems. If trading using price action or indicator-based strategy, then Level I market data is all that is required. Level I data includes the following information: Bid price: The highest posted price where someone is willing to buy an asset Bid size: The number of shares, forex lots, or contracts that people are trying to buy at the bid price Ask price: The lowest posted price where someone is willing to sell an asset. Also called the "offer price" Ask size: The number of shares, forex lots, or contracts being sold at the ask price Last price: The price at which the last transaction occurred Last size: The number of shares, forex lots, or contracts involved in the last transaction Scalpers, or traders who trade based on changes in how other traders are bidding and offering, use Level II data, which provides multiple levels of bids and offers. Level II Market Data Level II provides more information than Level I data. Mainly, it doesn't just show the highest bid and offer, but also bids and offers at other prices. Highest Bid Prices Shows the highest five to 15 prices where traders are willing to buy an asset and have placed an order to do so. It means you not only see the current bid, but also all the bids currently below it. In actively traded stocks, there will typically be bids every $0.01 below the current bid, and in actively traded futures, there will typically be a bid each tick below the current bid. If there is a gap between the current bid and next bid, that typically means that the stock or contract may have a larger bid/ask spread than stocks with bids or offers at every visible price level. Bid Sizes The number of shares, forex lots or contracts that people are trying to buy at each of the bid prices. Lowest Ask Prices The lowest five to 15 prices where traders are willing to sell an asset and have placed an order to do so. In actively traded stocks, there are offers at every $0.01 above the current ask, and in actively traded futures there are offers at each tick above the current ask. Ask Sizes The number of shares, forex lots, or contracts that are available at each of the ask prices. Level II market data provides the additional information needed to trade based on changes that occur in the bids and offers. Some traders like to look at how many shares are being bid versus how many are being offered, which may indicate which side is more eager or more powerful, and it may predict the short-term direction of the market price. This tactic is combined with watching the recent transactions. If most of the transactions are occurring at the bid price, it means that the price could go down in the short term, whereas if most of the transactions are occurring at the offer, the price could go up. These methods may also be combined with chart-based strategies. Level II is also known as the "order book" because it shows all orders that have been placed and are waiting to be filled. An order is filled when someone else is willing to transact with someone else at the same price. Level II is also known as "market depth" because it shows the number of contracts available at each of the bid and ask prices. Data Availability and Pricing Market data comes from the exchange that offers the market. For example, the New York Stock Exchange (NYSE) provides Level I and II data for stocks listed on the NYSE. Day traders receive the market data via their day-trading brokerage. Level I and II are available for futures and stocks. Some forex brokers also offer Level II market data, although not all do. Level II costs more than Level I for stocks and futures. Some brokers may provide all of the data feeds for free, but they typically charge higher commissions to compensate. Forex brokers that provide Level II data usually don't charge for it. Frequently Asked Questions (FAQs) How do you use the order book to trade? The detailed data on trade orders can help inform your trading decisions. Exactly how the data will be used depends in part on your trading strategy, but generally, the order book gives you more detail about the strength and volume behind trade orders. If more orders are waiting on the buy side than the sell side, for example, then that's a bullish signal, and it could give you more confidence in bullish trades. How do brokerages profit from the bid-ask spread? Brokerages and other market makers profit from the difference between the bid price and the ask price, otherwise known as the "bid-ask spread." Buyers pay the ask price, and sellers receive the bid price, and market makers keep the difference. It may be only a penny or two or profit, but market makers do that thousands of times per day. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Charles Schwab Corporation. "Level II Quotes and Time & Sales." QuoteMedia. "What is Level 1 and Level 2 Data?" Securities and Exchange Commission. "The Nasdaq Stock Market: Form 1 - Exhibit E," Page 3. TD Ameritrade. "Brokerage fees - Market Data & News."