Different Real-Time Price Quotes for Day Traders
All brokerage firms offer price quotes: a summary of the current bid and offer prices for selling or buying the security in question. But not all of these price quotes are the same. Some are offered in real time — meaning that you see the prices as soon as your modem can transmit the change to you. Others are delayed, sometimes by seconds, sometimes by minutes. To investors with plans to hold a bond for 10 years, the difference in price between now and 15 minutes ago isn’t material. But for day traders in the bond market using short-term changes in treasury futures, then a delay of even 30 seconds might be the difference between a strategy succeeding or failing.
Direct access brokers allow you to see the price quotes in real time so that you can act on them immediately, and they allow you to work through different electronic communications networks rather than going through the firm’s own traders. Almost all day trading strategies need direct access in order to maximize profitability.
Faster, detailed price quotes are valuable to traders, especially to day traders, so brokerage firms usually charge more for them. Don’t skimp on price services at the expense of your trading profitability.
Level I quotes
Level I quotes give you the current bid and ask, or bid and offer, prices for a given security. The bid, of course, is the price at which the broker buys the security from you, and the ask, also called offer in some markets, is the price at which the broker offers to sell the security to you. A Level I quote also shows the size of the most recent buy and sell orders.
Most brokerage firms offer real-time Level I quotes for free, but these numbers do not have enough detail for day trading.
Level II quotes
Level II quotes not only tell you what the current bid and offer prices are, but they also tell you who the market makers are — the brokerage firm traders who are buying and selling the security — and what size orders they have at different prices. This information can help you gauge the volatility and direction of trading in the market, and that can help you make more profitable trades. Most brokerage firms that specialize in day trading offer Level II quotes in most markets.
TotalView quotes show all orders in the market for a given security, both attributed to market makers and anonymous. This gives traders the most detailed information about what’s happening in the market. It may be overkill for some day trading strategies, but vital to the success of most.