What is the difference between Level 1 data versus full depth of dom?

Trading and Investing Helping Traders
1

Hello everyone,

I’ve been delving deeper into trading recently, and I’ve come across two terms that I’m trying to differentiate: “Level 1 Data” and “Full Depth of the Order Book (DOM)”. From what I understand, they both relate to market data but seem to have distinct characteristics.

  1. Could someone explain the key differences between these two?
  2. Are there specific scenarios or strategies where one might be more useful than the other?
  3. Are there any notable pros and cons to each type of data?
  4. Lastly, if I wanted to start incorporating one (or both) into my trading strategy, do you have any platform or service recommendations?

Thank you in advance for your insights!

Nija

2

Hi @Nija404 and welcome to the Optimus Futures Community.
Great question about the differences between Level 1 and Level 2 data. Let me break it down for you:

  1. Understanding the Data Types:

Level 1 Data:This provides just the current best Bid (buy price) and Ask (sell price) for a security. You’ll only see the highest bid and the lowest ask prices, without insight into the volume at each level.

Level 2 Data (or Full Depth of the Order Book/DOM): Commonly known as the “Order Book” or “Market Depth”, this offers a more comprehensive look. You’ll see the full volume of bids and asks at every price level. If you hear terms like Market By Order (MBO), it’s referring to this detailed view.

  1. Strategy Implications:

Order Flow Method:Some traders use Level 2 data to apply the Order Flow method. Here, the volume at each price is analyzed to spot potential support and resistance points, possibly indicating where the price might head next.

  1. Weighing the Pros and Cons:

Level 1 Data:
Pros: Simple, less daunting for newcomers, and widely available.
Cons: Doesn’t provide a detailed market view, limiting deeper analysis.

Level 2 Data:
Pros:Offers a deeper market view, can suggest market direction, especially handy for day traders.
Cons: Can be a bit much for newbies, and requires a deeper understanding to utilize effectively.

  1. Recommendations on Platforms:
  • If you’re considering integrating this data into your trading, Optimus Flow is a good place to start. They offer both Level 1 and Level 2 data and have tools tailored for Order Flow analysis.

Final Thoughts: Always remember, data is just one piece of the puzzle. How you utilize this information in your trading strategy and risk management is key. If you’re new to Level 2 data, maybe start with a demo to familiarize yourself before diving in with real funds.

Hope this helps!

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.