What Does Level 1 Mean

What Does Level 1 Mean in Trading?

4 min read

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

What does Level 1 mean? This question needs to be answered if you are a beginner. Level one is real-time bid and ask at any time. In other words, pulling up Level 1 gets 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 is the sellers. This shows the most basic information, in this case, buyers and sellers. You can see who has control of the stock at that moment and the most recent price of an executed trade.

What Does Level 1 Mean

Level 1 vs Level 2

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 number of buyers, sellers, and the price at which the last trade was made. It doesn’t tell market makers who are trying to buy/sell, the type of order (market or limit), or the order size. 

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

The important thing to remember with Level 2 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?

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When Did It Start?

Has the question about what Level 1 means 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.

Final Thoughts: What Does Level 1 Mean?

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

It would be best if you had that direction to be 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 quickly. Use your tools together and let them work for you.

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