GLOSSARY // Day Trading
Level 2
Level 2 is the live order book display: every visible bid and offer at each price level, tagged with the market maker or ECN posting it and the size shown. Where Level 1 gives only the best bid and offer, Level 2 shows the depth stacked behind them.
Traders read it for supply-demand structure — a thick wall of offers at $5.50 versus thin bids below can telegraph where a move stalls. The caveat is that displayed size is not commitment: orders cancel in milliseconds, large players hide size with iceberg orders and dark pools, and on fast-moving low floats the book refreshes too quickly to read literally. Level 2 works best paired with time and sales, which shows what actually executed rather than what was merely advertised.
A stock sits at $7.42 x $7.44. Level 2 shows 300 shares offered at $7.44 but 42,000 stacked between $7.50 and $7.52 across four ECNs. A breakout buyer knows the real test is not $7.44 — it is whether volume can chew through the $7.50 wall.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.