Level 1, Level 2 and Time & Sales: what each one shows

Level 1 is the top line: the best bid, the best ask, their sizes and the last trade, as explained in the bid-ask spread lesson. Level 2 adds depth, the orders resting at the next prices away. Time & Sales adds history: what traded, at what price and in what size. The names you will meet:

  • Nasdaq Level 2: each market participant’s best bid and offer on Nasdaq, labeled with a four-letter code called an MPID.
  • Nasdaq TotalView: Nasdaq’s full depth-of-book feed, every displayed quote and order at every price on its own book; still one exchange.
  • Aggregated books: many brokers merge several exchanges’ displayed quotes into one ladder, labeling each row NSDQ, ARCA, EDGX and so on.
  • Time & Sales: the stream of trade reports, including off-exchange trades, which never appear in an exchange book.

How to read a Level 2 screen

Bids sit on the left, highest first; asks on the right, lowest first. The top rows form the inside market, and the gap between them is the spread. Each row shows a price, a size (in shares or lots of 100, depending on the platform) and who is posting it.

Read the shape, not single numbers. A thin ask above price means little stands in the way; one large offer at a key level or a round number is a wall that buyers must trade through. Judge size against what the stock normally trades: 12,000 shares is a wall in a stock that prints 300 at a time and noise in one that prints 50,000; relative volume helps you calibrate.

How to read Time & Sales

Each line of the tape is a trade, colored by where it printed against the quote: at or above the ask usually means an aggressive buyer lifted the offer; at or below the bid, an aggressive seller hit the bid; in between, a midpoint trade, often off-exchange. The color is inferred from the quote at that instant, so in fast markets it can be wrong.

Watch speed and size rather than single prints. A tape that suddenly accelerates at the ask while the offer shrinks shows buying pressure; a burst of large prints at the bid that fails to push price lower suggests absorption. Off-exchange trades must be reported within 10 seconds, so some prints arrive slightly late. For delta and footprint charts built from the same data, see order flow trading.

What scalpers look for

None of these is a signal on its own. They matter at a level you marked before the open, as in key levels for day trading.

  • Absorption: heavy trading at one price that fails to move it, such as sellers hitting a bid that keeps refilling.
  • A level that refreshes: displayed size that comes back after it trades, a sign of a reserve or iceberg order; when it stops refreshing and gets taken, price often moves fast.
  • Large prints: trades far bigger than normal at a key level, which show interest, not direction.
  • Stacking and pulling: size added as price approaches, or removed just before price arrives, as in the drawing below.
  • Tape speed: a break on accelerating prints is more convincing than one that drifts through on a few trades.

Turn your phone sideways to read the image. Tap to close.

Two hypothetical Level 2 snapshots. Left, price 50.06: an ask at 50.07 and four bids below, the last one 15,000 shares at 49.90, highlighted, with the note stacking: 15,000 shown under price. Right, price 49.94: the bid at 49.90 now shows only 600, struck through in red, with the note price gets close: 600 left. Below: shown size is an offer, not a promise, and orders meant to be canceled are spoofing, which is illegal.

The limits: what the book does not show

Hidden and reserve orders. Exchanges such as Nasdaq accept non-displayed orders, and reserve orders that show only part of their size and refill as it trades. The 500 shares you see may sit on top of thousands you do not.

Fragmentation. US stocks trade on more than a dozen exchanges and off-exchange, at wholesalers that fill retail orders and in alternative trading systems often called dark pools. Cboe’s review of 2025 puts off-exchange trading at 50.6% of consolidated volume, the first year above half; those trades print on the tape but never sat in a book you could see.

Spoofing. Placing orders you intend to cancel, to fake supply or demand, is illegal: the Dodd-Frank Act of 2010 banned it explicitly on US futures exchanges, and the SEC has charged layering in stocks as manipulation under the Securities Exchange Act. It still happens, so treat displayed size as information, not commitment.

Turn your phone sideways to read the image. Tap to close.

Left, an iceberg at a water line: above the water, labeled what you see, shown: 500 at 50.00; below, a much larger hatched mass labeled reserve size refills as it trades. Right, three dashed boxes for what you do not see: non-displayed orders, other exchanges, and off-exchange: wholesalers, dark pools, with the note over half of 2025 US volume: on the tape, never in the book.

A practical tape-reading setup

Keep it narrow: one or two liquid stocks, a few planned prices, and a chart for context. The scalping strategy lesson covers which names and costs suit this kind of trading.

  1. Pick one or two liquid stocks or ETFs with a one-cent spread.
  2. Watch Level 2 and the tape only near a level you marked before the open, with a 1- or 5-minute chart beside them; see the best timeframe for scalping.
  3. Highlight large prints on Time & Sales, sized for that stock.
  4. Write down what confirms the trade, such as an offer that stops refreshing and gets lifted, and what cancels it.
  5. Take the stop and the target from the chart: the tape decides when, not where.
  6. Skip the trade if the spread is more than about a tenth of your stop.

Worked example: an offer that refreshes, then breaks (hypothetical)

XYZ is a made-up stock trading just under $50.00, a round number and yesterday’s high. At 10:12 a.m. ET the book shows 12,000 shares offered at $50.00, far above the usual 1,000 or so. Over two minutes about 20,000 shares print at $50.00 at the ask, yet the offer still shows 11,000 and nothing trades higher: a seller is absorbing the buyers. No trade yet.

At 10:16 the offer drops to 1,500 and is lifted; prints at $50.01, $50.02 and $50.03 come quickly, and the best bid steps up to $50.00. That is the trigger; the stop and the target come from the chart.

  1. Entry: $50.03, with a limit order; see order types.
  2. Stop: $49.88, under the $50.00 level and the last higher low at $49.92. Risk: $0.15 a share.
  3. Target: $50.33, just under the pre-market high at $50.35. Reward: $0.30, or 2R before costs.
  4. Size: a $25,000 account risking 0.2% per scalp accepts $50; with about $0.02 of round-trip costs, $50 ÷ ($0.15 + $0.02) = 294 shares, as the position size calculator shows.
  5. Result: about 294 × ($0.30 − $0.02) = $82, roughly +1.6R after costs, at the target; 294 × $0.17 = about $50, or −1R, at the stop.
  6. Early exit: if the offer at $50.00 reappears right after the entry, the break has failed; selling near $49.97 costs about $0.08 a share with costs, roughly half of 1R.

Turn your phone sideways to read the image. Tap to close.

Three Level 2 snapshots of XYZ. 10:12: an offer of 12,000 at 50.00, highlighted, with the note a big offer at the level. 10:14: the offer still shows 11,000 after 20,000 traded at 50.00, with the note it refreshes. 10:16: the 50.00 offer is gone, the best bid is 50.00 and prints run 50.01, 50.02, 50.03, with the note pulled, then lifted. A green band underneath reads entry 50.03, stop 49.88, target 50.33 = 2R.

Common tape-reading mistakes

Most problems come from trusting the screen too much:

  • Watching the tape all day without levels, so every print becomes a reason to trade.
  • Treating displayed size as real support or resistance.
  • Chasing a large print, which shows interest, not the winner.
  • Trading thin stocks, where a few orders paint the book.
  • Paying for depth data before having a written plan: Level 2 sharpens timing, it does not create an edge.