What Does Level 1 Mean and How to Use it When Trading?

What does Level 1 mean when trading? It shows the current number buyers and the sellers real-time and last quote price. The bid price is the highest price that a buyer is willing to pay. The ask price is the lowest amount that a share holder is willing to sell their shares for. Level one updates constantly throughout the trading day for every stock.

What Does Level 1 Mean When Trading?

What does Level 1 mean is the question that needs to be answered if you are a beginner. Level one is real time bid and ask at any time. In other words, if you pull up Level 1 you get the bid/ask spread in real time. All basic brokers, like Webull for example use Level 1.The bid is the buyers and the ask are the sellers. This is showing the most basic information, in this case, buyers and sellers. You can see who has control of the stock in that moment as well as the most recent price of an executed trade.

The stock market is a tug of war between buyers and sellers. This fight is the foundation of trading. It’s how Japanese candlesticks patterns are formed as well as technical analysis. The bull and bear battle for control is also how Level 1 is is made.

You shouldn’t buy or sell a stock just based off that information alone. It takes so much more than that. Candlesticks and patterns as well as technical analysis are the best tools in stock trading.

Couple those with the bid ask spread and you have a good grasp of a stock’s price movement and direction (bookmark our penny stocks list and stock watch lists pages).

Level 1 vs Level 2

Does Does Level 1 Mean

Level 2 is something most traders are probably the most familiar with. However, what does Level 1 mean? You’ve probably heard traders talk about Level 2. So what’s the difference between the two?

We already know that Level 1 provides the most basic information. The amount of buyers, sellers and the price that last trade was made at. What it doesn’t tell market makers is who’s trying to buy/sell, the type of order (market or limit), or the size of the order. Read our post on the difference between market order and limit order if you need to know more.

What does Level 2 tell us? You can see the orders market makers are putting in, the size and price as well as who’s making the order. It does give a little more information.

The important thing to remember with Level 2 though is that it can and usually is manipulated by computers. In other words, the information you’re seeing is psyching traders out so they get in or out of trades.

That means you shouldn’t just rely on that information to make a trade. What are the charts telling you?

When Did It Start?

That that the question what does Level 1 mean been answered, how did it begin? The stock market has been around for a very long time. The different Levels were used very rarely before the invention of the internet.

Before online trading, you had to call your broker to get these quotes. Now they’re offered through your platform free of charge.

You can also find these quotes online from websites like Yahoo Finance. Although, having it right on your trading platform is convenient and easy to find.

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What Does Level 1 Mean

Level 1 is on the right hand side highlighted in yellow.

What Does Level 1 Mean & How Should I Use It?

What does Level 1 mean is the basic information of how many buyers and sellers there are. If you do use it, couple it with candlesticks and patterns. Candlesticks by themselves tell a story but when grouped together, they paint a bigger picture.

You need that direction in order to make a successful trader. Buying a stock filled with doji candlesticks in a neutral pattern like symmetrical triangle patterns is risky.

You chose the wrong direction and your trade is bad. You may know how many buyers and sellers there are but that can change in a moment. Use your tools together and let them work for you. Take our free online trading courses.

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