Introduction to Time & Sales and Level 2 - Tools for Day Trading:

Day Traders use every tool at their disposal to help them decide when a good time to enter or exit a trade will be.

Time & Sales and Level 2 are two such tools. This video is a brief explanation of how these tools are used to determine if a stock or Exchange Traded Fund (ETF) will go up or down in the next few seconds.

These tools can not be used for Swing Trading or for day trades that last for hours when the market is trending strongly either up or down.

These tools do help when you are doing Scalping types of day trades. Scalping is when you enter a trade that will only last for a few minutes with a large block of shares. When the stock or ETF has moved up or down ten to fifty cents very quickly, that is a good time to exit the position to lock in your profits before the trend reverses.

When I do Scalping trades, I usually buy 1000 to 5000 shares. With 1000 shares, I'm looking for a move in the ten to thirty cent range in five to fifteen minutes. A ten cent move yields $100. and a thirty cent move yields $300.

When I trade 5000 shares, I'm looking for the stock to move five to twenty cents in five to fifteen minutes. A five cent move yields $250. and a twenty cent move yields $1000.

Sometimes I trade using 10,000 shares. Each penny the stock moves in the direction I want it to is worth $100. So if a stock moves ten cents, that yields $1000. usually in less than fifteen minutes.

These tools work better on some stocks or ETF than others. It is hard to use these tools on a stock or an ETF that trades 100 million shares each day. They work best on stocks that trade 5 to 25 million shares per day. The less daily volume a stock gets, the easier it is to see how these tools work.

While I can show you the basics of how these tools work, the only way you will get proficient at reading them is to study them for many hours each day over a period of a few years. If you would like to read more about Time & Sales and Level 2, here is a good article on the subject:

http://www.investopedia.com/Level 2

If you watch the three videos at the top of the Video Charts page of my website that show me doing real-time day trades while the market is open, you'll see that I mention these two tools and show how they work in action.

www.stock-market-lessons.com/videocharts.html



Happy Trading,
zigzagman