1. Money

Market Data Definition

By

Day trading market data is the current trading information for each day trading market. Market data includes various pricing information (such as the most recently traded price), and various volume information (such as the number of contracts that were most recently traded). Day traders use market data with their trading and charting software, so that they can watch their markets and make their trades.

Market data is available in two different levels, with level 1 providing the basic trading information, and level 2 providing some additional trading information.

Level 1 Market Data

Level 1 market data provides all of the trading information that most day traders need, including the following :

  • Bid Price - The highest price that a trader is willing to pay to buy a contract (or share). This is the price that will be received for any market orders to sell a contract.
  • Bid Size - The number of contracts (or shares) that are available at the bid price. When this number of contracts have been traded, the bid price will move down to the next highest price.
  • Ask Price - The lowest price that a trader is willing to accept to sell a contract (or share). This is the price that will be received for any market orders to buy a contract.
  • Ask Size - The number of contracts (or shares) that are available at the ask price. When this number of contracts have been traded, the ask price will move up to the next lowest price.
  • Last Price - The most recently traded price. This is also known as the closing price, if it is the last price traded in the trading session (i.e. trading day).
  • Last Size - The number of contracts (or shares) that were most recently traded.

Level 2 Market Data

Level 2 market data provides some additional trading information that is used with trading systems that follow the order flow, such as scalping trading systems or advanced volume based trading systems. The additional trading information includes the following :

  • Highest Bid Prices - The highest five prices that traders are willing to pay to buy a contract (or share).
  • Bid Sizes - The number of contracts (or shares) that are available at each of the bid prices. When each of these number of contracts have been traded, the current bid price (included with level 1) will move down to the next level 2 bid price.
  • Lowest Ask Prices - The lowest five prices that traders are willing to accept to sell a contract (or share).
  • Ask Sizes - The number of contracts (or shares) that are available at each of the ask prices. When this number of contracts have been traded, the current ask price (included with level 1) will move up to the next level 2 ask price.

Level 2 market data is also known as the order book, because it includes all of the buy and sell orders that are currently pending for the market, and also as the market depth, because it includes the number of contracts that are available at each buying and selling price.

Availability

Both level 1 and level 2 market data are available for most day trading markets (including futures and stock markets). Level 2 market data is usually slightly more expensive than level 1 market data, because of the additional information that it provides, and because it is often considered more advanced. Which level of market data a day trader needs, will depend upon the markets that they are trading, and their trading system. Most indicator based day trading systems only need level 1 market data, but trading systems that only use price information usually need level 2 market data as well.

©2014 About.com. All rights reserved.