Level 2
Family XII · Other terms
Not to be confused with margin level, resistance level, stop out level.
Level 2 is a depth-of-market data feed that lists the best bid and ask prices together with the orders resting at each price level. Where level 1 shows only the best bid and best ask, level 2 adds the size and, depending on the venue, the identity of market participants behind those quotes. It is used to judge order-book depth and near-term supply and demand.
What a level 2 display contains
A level 2 window typically shows two columns: bids on one side and asks on the other. Each row is a price level, and each level carries a quantity. Some venues publish aggregated size per price; others publish individual orders, often tagged with a market participant identifier. The number of visible levels varies by venue and data package, and the feed updates in real time as orders are added, amended or cancelled.
- Price levels: the best bid and ask plus deeper levels away from the touch.
- Size: the total quantity, or individual order quantities, at each level.
- Participant tags: optional identifiers showing which member posted the order.
Worked example
An order book for a stock shows the following level 2 snapshot. A trader wants to buy 1,200 shares at the market.
The first 500 shares fill at 25.10, the next 400 at 25.11, and the remaining 300 at 25.12. The volume-weighted average price is 25.1083, which is higher than the best ask of 25.10 because the order consumed multiple levels.
Level 2 versus level 1
Level 1 data provides only the best bid and best ask with their sizes. Level 2 extends this by showing the orders queued behind the best prices. The additional depth allows a trader to estimate slippage for larger orders and to see whether the best quote is supported by substantial size or is a thin, fleeting order. Availability, update speed and participant tagging differ by exchange and data subscription.
Often confused with
- margin level
- Margin level is an account equity-to-used-margin ratio expressed as a percentage, not a market data feed; the visible sign is that it appears in a trading account summary rather than in an order book.
- resistance level
- A resistance level is a chart price where selling pressure has previously halted an advance, not a live order-book feed; the visible sign is that it is drawn on a price chart as a horizontal line.
- stop out level
- A stop-out level is the margin level at which a broker closes positions automatically, not a depth-of-market display; the visible sign is that it is stated as a percentage threshold in the broker's margin policy.