What is Level 2 data and how do you trade with it?

Level 1 vs Level 2: what is the difference?

When you view a share price on most platforms, you are seeing Level 1 data: the current best bid, the best ask, the last traded price and volume. This tells you what the market is doing right now, but nothing about the orders waiting to be filled.

Level 2 data, also known as the order book or market depth, shows the full queue of buy and sell orders. Each line shows a price level and the total number of shares sitting at that price. You can see how many buyers are queued at 100p, how many at 99p, how many at 98p, and the same on the sell side. This additional visibility gives active traders a significant informational advantage over those relying on Level 1 data alone.

How to read Level 2 data

Level 2 screens typically display two columns: bids (buyers) on the left, asks or offers (sellers) on the right. Here is how to interpret what you see:

• Price levels: the bid side lists prices in descending order, highest bid at top. The ask side lists prices in ascending order, lowest ask at top. The gap between the two is the spread.
• Sizes and quantities: each price level shows the total number of shares queued there. Large quantities at a price level represent significant support on the bid side or resistance on the ask side.
• Market makers: on UK markets using the SETS system, you can often see which market makers are posting quotes and at what size.
• Depth of book: a deep book with many price levels and large quantities suggests a liquid, actively traded stock. A thin book suggests lower liquidity and potentially wider spreads in volatile conditions.

What does Level 2 data tell traders?

Identifying support and resistance

When you see a large cluster of buy orders at a specific price level, that level acts as a support floor: buyers may absorb selling pressure and halt the decline. A large cluster of sell orders forms a resistance ceiling. Active traders use these observations to set entry and exit prices more precisely than chart analysis alone allows.

Spotting imbalances

When the total size of buy orders significantly outweighs sell orders (or vice versa), it suggests directional pressure. A strongly bid book with thin selling at higher prices can indicate upward momentum. A book heavy with sellers just above the current market can signal upcoming resistance.

Identifying iceberg orders

Large institutional orders are sometimes split into smaller visible quantities, with the remainder hidden. Traders who notice a large order being repeatedly replenished at the same price level may be seeing the tip of an iceberg order, indicating a major buyer or seller at that price.

Timing entries and exits

For active intraday traders, watching the bid and ask sizes shift in the moments before a news release or at the open can help assess whether there is likely to be a sharp move and in which direction.

Level 2 data and IPOs

Level 2 data is particularly valuable when trading newly listed companies, where price discovery is still underway and order book dynamics can be more informative than price history. When a stock has limited chart history, the order book provides the clearest available signal of where buyers and sellers are positioned.

Several high-profile IPOs are currently being watched by UK investors. Shawbrook Bank, Revolut, Verisure and DeepSeek are among the most closely followed candidates. For any new listing, Level 2 data in the early days of trading provides valuable context on institutional positioning and where real price support lies, before enough price history accumulates to support meaningful technical analysis.

Limitations of Level 2 data

• Spoofing: a trader can place large visible orders with no intention of executing them, creating a false impression of demand or supply, then cancel before they are hit.
• Dark pools: a significant proportion of institutional trading takes place in alternative trading venues that are not visible on the displayed order book.
• Speed: at high trading volumes, the order book can change dozens of times per second. Unless you have algorithmic systems, the order book you see is already slightly historical.
• Complexity: Level 2 data requires experience to interpret correctly. Misreading the order book is a common mistake among new traders and can lead to poor decisions.

How to access Level 2 data with us

Our L2 Dealer platform provides direct market access to Level 2 data for UK, US and European shares. L2 Dealer allows traders to place orders directly into the market's order book at specific price levels, giving the same execution mechanics as institutional traders. It is available for spread bets and CFDs on shares, and is best suited to experienced traders comfortable reading order flow and managing positions actively.

Level 2 data FAQs