I would describe this chapter as the “grab bag” of topics and terms. Nate goes over a lot of some of the most comment misunderstood terms and concepts including:
- Float rotation
- Fake offers
- Bid stuffing
- Short Sale Restriction – SSR
- 1/10 rule on higher priced volatile stocks
- Adding liquidity and taking liquidity
- ECN rebates and fees
- Level 2 “Games”
I would call this more of a “beginners” chapter, but I did still learn a lot of random stuff about Level 2. I’ve mentioned before I don’t follow Level 2 that closely myself mainly because of a lot of the fake shit and games. But hearing Nate’s commentary helped me understand a little better some of the stuff I had a gut feeling for but was never able to really define.
Once of my favorite parts of this chapter was Nate’s description of “Taking a step back and looking at the big picture”. I’ve mentioned this before but I am very susceptible to tunnel vision while in a trade. Which can frequently lead to premature and impulsive exits.
Another very well presented and laid out chapter, if you are advanced you may or may not get a ton out of it, but even if you aren’t interested in the items covered, there is still some very solid “psychology of trading” discussed. So I still feel like I learned from this chapter.
If you are unfamiliar or don’t’ fully understand any of the terms in the bulleted list above, then it is for SURE for you, each term is very well defined as you watch REAL TIME on the screen. I had a couple “ah ha” moments in this chapter.
Chapter 7 – Level 2 Analysis and Float Rotation
-CDTI – Float Rotation Discussion
Front side of the move – line in the sand needs to break
Look at size on offer, does it get soaked up?
Interesting to get talked through a fake offer.
Some value to not focusing to much on Level 2, can be to much noise.
Absorbing – buying on the bid into panic
50/50 trades are best to ignore, look for something with more of an edge/trend.
Good example of a short squeeze/pop when the trend doesnt break/holds support.
Take a step back and reset your risk to reward, I often suffer from this, focus to closely on tick by tick instead of zooming out and reseting your levels and resetting your idea of risk.
Post 3:30 PM grind up, good chance of pop into short squeeze/gapper
Smaller size and more wiggle room around levels. Be smarter on stops.
-NUGT SSR execution
Visual representation of SSR
SSR does not mean you can’t short, you just can’t short the bid side. /Uptick
Cool real time order showing the SSR in action.
Need to short POPS not breakdowns under SSR
1/10 rule for sizing on $90 stock, think of it as a $9 stock
People think a $95 could go to $100 (5 dollars) but $9.50 could easily go to $10.
SSR pullbacks are hard, but tough since you need to short into spikes.
Start in small, then add into speedups/para’s
Need to be prepared to size down though if wrong.
-VPCO -Adding liquidity vs taking liquidity
Simple concept, but well explained
-VSR – Stuffing
Bigger picture idea, smaller size on front side.
Example of line in the sand.
Volume push into resistance level
-JRJC Level 2 “Mind Games”
Bid soaking/hidden buying
Interesting to watch with Nates commentary
Stuffing into whole number
Good commentary on level 2 games