How to use Level 2 data in your Day Trading Strategy (WITH LIVE MARKET EXAMPLES)

what's up everyone all right so today I'm gonna talk about how I used level 2 to predict a breakout or a stock that is currently up over two hundred and twenty percent on the morning in less than 30 minutes the stock squeeze from thirty dollars a share up to over sixty five dollars per share and I use level two to predict that during the first pullback it would break to the upside we're watching it as it consolidated between the support level and resistance level and there was something very specific that I noticed on the level two that made me really think that it was gonna break to the upside so that's what we're gonna talk about during today's video this is a little bit different from my typical midday market recap and that's because as many of you guys know in two weeks I'm starting over with a new small account 500 bucks and because I'm starting over the $500 account I've got to be really careful about what I'm gonna trade and so during these next two weeks I'm of course training to go into this new small account challenge and so as a result I did not end up trading a stock that we're gonna talk about today cuz it opened at $30 a share it's just simply too expensive for small accounts but what we're going to talk about on level 2 can be applied to stocks of any price range and is just the latest example of a very clear indicator of support all right so let's get into the video let me break down for you what I saw that made me believe that this stock and break to the upside all right you guys so this is what we're working with KRT X currently up two hundred and fifty five percent as of right now this moment on the day I mean this stock is this is incredible this is a huge move it was on the top of the gap scanner this morning if I run the gap scanner for 9:15 a.m. every morning when I run this scan it shows me at 9:10 9:15 a.m. which stocks are opening or trading at higher prices than the previous day and so you can see this was already creating this essential gap higher from the previous day and this was all based on news as you can see here in this window so this is all the news that came out overnight on the stock that was driving the price higher of course I focus on trading the first hour of the day because the first hour of the day is when the market reacts to news overnight and so when we usually get the best breakouts with the cleanest resolution and we certainly got that today on KRT X of course I immediately was like well you know train with a $500 account this stock is just gonna be so expensive that you know at most I would be able to buy I just wouldn't be able to take any share size you know that's the problem with a 500 dollar account without leverage I'd be talking about like 10 15 20 shares with leverage maybe a hundred shares but you know this this just is would be a risky stock to trade so in any case and for those of you trading with larger accounts this would have been something could have traded and what I'm gonna show you on the level 2 I've seen of stock on stocks of all price ranges so this is really just a strong indicator of something that you want to be looking for and it occurred during this period of consolidation right through here all right so this is where we saw this is where I identified this pullback so what I'm gonna do for you guys is I'm going to show you the recording here of this stock as I was kind of breaking it down and watching it and my main issue with it sort of early on like in this in this area I was thinking about trading it you know sort of interested but I was like man this the stock is so extended and at this point right here just up from a charting perspective what I saw as a sign of weakness was this candle and let me just back this out here so this candle right here being a red doji all right a red doji on high volume that's a clear candle of indecision and what often happens is it's a reversal indicator and then confirmation the reversal would be the first camel to make a new low now what ended up happening was the stock just kept grinding higher and higher despite this this clear you know potential reversal indicator so I was like all right well now I'm a little bit confused because the stock is not really respecting the the technical analysis and that was actually one of the first indicators that something a little bit different was gonna happen with the stock when a stock from a technical perspective is looking weak like has a red doji with high day volume but surges up anyways what that indicates to me is that there are people that are buying this stock that are not using traditional technical analysis used by day traders now some stocks on a regular day are primarily being traded by day traders whereas others are being purchased by long-term investors who truly believe in the news catalyst has been released and the potential of the company and are taking a long-term position when you have that you have people that are buying that aren't looking at charts necessarily that are buying because they simply want to get in the stock and sometimes with very large orders which will kind of throw off the technical analysis because they'll just all of a sudden send a buy order at what technically we would consider as day traders to be a random spot and so that's where we sort of get thrown off when you have long term investors or hedge funds or whatever it is investing in some of these companies and you're gonna see that a lot more in the higher price range but you do see it on some of the lower priced stocks as well so during this period of time right now this is the level two here so we've got the bid on the Left we've got the ask on the so the buyers on the left the sellers on the right stocks currently up a hundred and fifty six percent we're on what is a little bit of a one-minute pullback right here on the one-minute chart so I'm gonna jump forward I'm glanced at a couple other charts and initially I was kind of watching this first candle on the one-minute to make a new high so first one-minute candle to make a new high is is typically something we would look at now what I want you to recognize here this candle just closed at 943 exactly that's when the one-minute camera closes and it has a high of it looks like about 44 no maybe that's 45 50 I'm not my mouse isn't over the the candle at the time but what we would be looking for is the first one-minute candle to make a new high that's a technical setup and so when I know the technical setup what I generally will do is I'll say okay if the price is and let me just go on the chart I'll just pull up the actual chart and tell you what the price was so the price of that candle at that time was let's see it was it was the high was 45 so the challenge their course is that this is 75 cents spread and so it's actually above 45 on the ask all right so let's just back this up for one second so we'll go just back to here all right so we're looking for the first candle to make a new high which is gonna be a break of 45 so there's 45 on the ask no prints have actually gone through above 45 and so as a result the kamla closes there it closes and now this candle is almost gapping slightly higher and surging up so generally on the level two I would have been saying okay I'm I'm long biased above $45 that's the spot that I'd be watching and I'll just put this up because I will use the volume on this in a second um alright so let's see so we'll keep going here and basically you see the stock squeeze back up we got a double top we know hi a day is always a spot that has a risk of double topping so we get a little bit of a double top a little bit of a fade all right so this is the whole area where it's just basically grinding higher I'm interested but I don't feel like there's a low-risk opportunity to take a trade on it through this area it's sort of chasing the circuit breaker halt so this is the halt level L uld those of you guys are interested in learning how to set this up on your charts is something that we cover in the classes and really this video is kind of like a little tidbit of the type of stuff that I go over in our classes so 5457 is a circuit breaker halt level that means the stock is squeezed up more than 10% in the last five minutes and is about to get halted but the bid price 5457 has to stay above that 5457 mark for a minimum of 15 seconds and so there it dips down below and look at that drop I mean that just dropped a dollar 70 per share or a dollar fifty per share and that's why of course the risk of this type of stock is trading it is on certainly on the higher side all right so it ends up continuing higher keeps chasing these sort of circuit breakers moving up to the circuit breaker level pulling back moving up to the circuit breaker level pulling that and then this time it gets halted it ends up resuming a little bit lower and here I said okay guys this is something very interesting highest second highest candle of the day is on red volume okay so this is technical there's a technical characteristic of the chart second high stays on red second highest candle today is on red volume we're getting a little bit of a pullback here so my question is is this going to be a pullback where the first one-minute Campbell to make a new high is gonna give us resolution and to move back up towards 60 and so I'm watching the level two and I notice that the spread continues to be as you can see quite large this again is a characteristic of higher priced stocks so the first candle to make a new high is currently over $56 alright so 56 is our kind of line in the sand here and brakes 56 rips up to 57 98 but we continue to have now an even larger spread of a dollar ninety cents per share so not able to take a trade on and just kind of watching from the sidelines but what this is gonna do is it's gonna end up forming it's gonna reject this level up here and end up forming what's called a gravestone doji which is a technical candle formation that's going to occur right here and so it's gonna occur because the stock squeeze is up to this level is unable to really break it in a strong way and then when the candle closes remember that candles closed every five minutes so at the end of this five minute period which will be 10:05 this is gonna close back down towards the low so here we've got 1004 and 35 seconds this is a red candle with a bottom and this little top and that's called a gravestone doji just maybe some what looks like a gravestone to some people I don't know but in any case what we have here is high red volume and pull back so during this area I'm thinking okay just now double bottom 253 I was actually watching it for a short below 53 because I'm thinking that this is a gravestone doji this is a technical indicator of reversal we've got high red volume here so I'm looking at it short below 53 and my stop is gonna be 55 so now through this area is where it kind of starts to get interesting and this is where I'm gonna play some of the audio of what I was talking about during during this period of consolidation so let me just jump a little bit further forward so that's where I'm analyzing a gravestone doji I'm talking about that candle I'm just gonna move a little bit further forward here just gonna see because it kind of consolidates in this range for a little period of time okay so let's see let me turn on my audio and here what I'm saying it's looks like there's a hidden buyer so I mean there may be someone buying the soft support despite that all right so let me just back this up for you real quick side if it breaks 53 so no telling they're at 54 and it's looks like there's a hidden buyer a hidden buy or maybe someone buying the soft support despite that now let's look at that again realistically so I'd be waiting for anything else to hit the hide a mom with scanner so the selling their fifty for selling at fifty three fifty so of course I'm watching the level tuned I'm thinking below fifty three is a short let me just zoom forward here so this is where I don't like too short see all so that right there that burst of selling at fifty four this is only displaying five hundred shares available to buy and all of that selling what that tells me is that there's a hidden hidden buyer accumulating shares at fifty four dollars per share the stock currently right now just for a reference is it a gain of two hundred and seventy percent on the day and is at sixty four seventy by sixty five twenty three alright so the stock is continuing to surge up so what what I saw here was this hidden buyer so let me play what I was analyzing we're sort of near these support levels just the risk there is on the higher side but realistically it looks more trustworthy to the short side if it breaks fifty three if it breaks fifty three it's a short but watch again this continued support around 54 so there again all of that selling at fifty four only showing 400 shares there's a hidden buyer someone is accumulating a lot of selling their fifty four position it's looks like there's a hidden buyer so I mean there may be someone buying the soft support despite that five minute gravestone doji so why would someone be buying this off of support here despite it gravestone doji you can clearly tell there's a hidden buyer here at 54 clearly all this selling is going through and the price is not breaking right so let's keep watching this more selling that's a ton of selling you've got thirty-three thousand shares of selling that just went through there so think about the position size someone might be accumulating so I'm really thinking I look at this and I think okay if it breaks below 53 it's gonna crack it's gonna break hard and we see this in the same way when there's a lot of accumulation underneath the level that's moving to the upside and when it finally breaks it's like a snap it just rips really quickly and I still look at this at this moment and I'm thinking that it's got a double bottom here at 53 if it breaks 53 we've got a potential move back down towards the view app of 44 and I felt the risk was much lower to the short side than to the long side given the fact that we had high add a volume here on a red candle or second highest volume candle is red we have two red candles in a row in the second one's a gravestone doji from a technical perspective everything is saying this stock is not trustworthy but on the level two we have this hidden buyer so let's keep watching this so we fast forward a little bit 405 by 5450 short would be in the past you know it's been a you're not gonna have someone I don't think you're gonna have someone covering a short position right here why would you okay there's a hidden buyer at 54 well obviously what it is so someone's buying this stock at 54 if you're short and you're covering here you either are way under water in which case why cover here when it's finally looking weak or you short it up here at 58 which are only up four dollars a share and it's looking really weak so that tells me that someone is buying this stock that's how I interpret and my interpretation could be wrong but you know that makes me wonder if we are gonna see this make it move higher or so I don't really feel comfortable shorting it so now I'm thinking it's not safe in short all right it's not safe to short because there's clearly a hidden buyer and so let me articulate again relatively why I thought that so if someone had shorted this stock up here at 57 or 58 let's just say let's say someone took a huge short and we've seen already over a hundred thousand shares go through so let's just say someone took a hundred thousand share short position which is I mean it doesn't even make sense but it's like a five million dollar short position all right so they took a massive short position up here 57 and they're covering down here 54 for only three dollars a share so okay that's a $300,000 gain but it's finally looking weak it looks like and remember as a short person as when you're short you cover by buying your shares so that would you could be a hidden buyer buying to cover but why would you cover right here when it is finally looking like with a gravestone doji that's gonna fall over so if you were a day trader and you were actually short thing up at 57 you would be holding for a move back down towards 44 back down towards the V web absolutely so that made me think that this is not a short sell seller covering a position now of course if a short seller was underwater from way down here they could cover right here but why would you cover here again when it's finally starting to look weak what you're doing with that hidden order is you're creating a pretty darn well support so why would you want to create that level of support and so now watch this now all of a sudden it's gonna rip and now we're off to the races alright so I was able to predict that this would happen over $55 a share because of that hidden buyer that was at fifty four and so the reason I chose or the reason I said 55 is because this consolidation here was right between for the most part it was right between $55 and 53 so I said below 53 is a short above 55 is a hard stop or a long and once we saw that hidden buyer become more and more kind of you know very clear I started feeling stronger that this was that there's someone here that was buying this up and so Goldman Sachs put out a buy or put out a price target rating on this of over $100 a share alright so you know now I'm thinking is there a hedge fund is there a big investor that's coming in here and it's just buying the stock up because this can't be a day trader you're talking about millions of dollars in in terms of a long position that's what it looks like to me that's not a day trader that's someone that is accumulating a massive position a hundred thousand shares 200,000 shares maybe more and let's think about how much that person is up right now they accumulated a lot of that position it looks like around 53 well if they took 300,000 shares they're up three million bucks all right $10 a share just about so this you know for for big money traders could have been a huge home run of course for a small account trader like me and like many of you guys this would be one that would be more difficult to take a large position on and no doubt a move from 55 up to 59 was a really solid breakout and a nice move but it's just not something that I would trust the risk there just for me to high so you know of course leave that alone and then we got this breakout here big spreads and this is one of those days where I said you know what I would feel better at the end of the day knowing that I maintain the discipline to not jump into a 55 dollar stock since my wheelhouse is between three and ten dollars three and eight dollars for a small account that I would be much better off if I focus on staying within my my wheelhouse so staying within the wheelhouse stay focused trade the best leave the rest even though this would be great for a large account for most of my students - a small account this this one doesn't happen to be one that would be easy to trade and so what we end up getting here is this squeeze and this move as you can see it just continues higher and higher so an awesome opportunity and even right there you know a big move and so it wouldn't surprise me if this stock does continue higher today because I really don't know that there's someone out there and that is day trading you know five ten million dollar position this seems more like something that someone is has just accumulated along this move and certainly in this area here 53 to 54 and that makes me wonder if we are gonna see this squeeze up towards 75 80 or even a hundred dollars over the next few days I you know will be very interested to see what happens because this could be a position that someone with you know five hundred thousand shares every every dollar shares five hundred thousand bucks so ten dollars a shares five million $30 a shares 15 million you know I mean you're talking about some some big money potentially being made by whoever as has accumulated that position so you know in any case we've seen this exact same pattern on lower priced stocks I'm trying to remember the the one that we saw most recently I'm blanking on the symbol but in any case it was a stock that squeezed up from about $18 to 50 $60 a share a similarly really impressive move and one of the first things that I know stood out it was that guys there's a lot of selling but someone is buying up shares and so when you've got like basically a big whale buying up shares that's when you just kind of want to see what's happening in the market and you don't want to get in that person's way you don't want to be shorting into that you want to just be riding that momentum that that person effectively is creating or that firm or the fund or whatever it happens to be so great opportunities here and those of you guys who have gotten really good at reading level 2 you were seeing the same thing that I saw that hidden buyer right back down there at 53 54 so let's look at that again just for a quick refresher so it's sort of right through where was this um looking for I've lost my place so it was right through this area here we got a little pullback dip down bounce off 40 53 and then right in here is where we started seeing that hidden buyer in the 54 and what's interesting is that even when it finally broke 54 because it did end up finally breaking $54 right it broke 54 and dropped down to like 53 80 but it didn't go lower than that so you know again it's just showing you that someone here was buying up a huge position and I can only speculate how many shares they bought and how long they're gonna hold it but I can't imagine that that wasn't an awesome win and you know again it couldn't have been someone who has been short this stock for the last six months and you know was just covering a huge loss on the short side it certainly could have been there's a story about a trader who lost I believe it was like 13 million or 15 million dollars on our kDa during this spike right here and the clearing front I think was the clearing firm was basically marketing him out of the trade and that's as you look at the chart is it was just like spiking up it was as the firm was closing his I think it was like an I don't know 700,000 800,000 share position like a massive position you know what happens when you do like a market order on 50000 share blocks or 100,000 share blocks on a low float stock they rip up so you'll see that type of stuff on level two and Arcadia is one that we did really well on but KRT X very interesting patterns here and I'm gonna be really interested to see what it does over the next couple days unfortunately again being in a small account sometimes these ones you just end up not being able to trade and even though I of course you know could open up my account and use my buying power I'm really trying to trade the exact same way that many of you guys are trade off that's why I'm doing a small account challenge so those you guys who are feeling a little bit of FOMO today were like can you know the stock squeezed up two hundred seventy percent and I wasn't able to trade it because I couldn't afford it that's something that you'll simply have to deal with in the market and you need to have a level of accept and surround it that sometimes you're gonna miss opportunities for one reason or another and that's okay cuz the good news is there will always be another stock around the corner so I hope this video has been helpful if you guys have any questions please leave them below in the comments I will come back through and answer them later today and in the in the future as you guys continue to watch this video and when we have another good example of something like this I will be recording it and I will make another video on alright so that's it for me again give me a thumbs up subscribe to the channel if you haven't already and I will see you guys for the next video hey did you know every morning I go live to stream at pre market watch list subscribe to the channel press the alert button and you'll get the notifications if you want to learn more about trading check out the links in the description if you have questions post them in the comments because I personally respond to every comment posts on my channel [Music]

Channel: Warrior Trading

Views: 278,726

Keywords: day trading, day trading strategies, trading strategies, how to day trade, beginner trading strategies, momentum day trading, stocks, trading, how to trade, stock trading, penny stocks, pdt rule, shares, float, volume, candles, profits, Wall St, finance, brokers, Ross Cameron, warrior trading, day trade warrior, how to use level 2 data, how to use level 2, how to read level 2, how to read level 2 data, level 2 trading, level 2, level 2 market data, market depth

Id: BaZ4R2ovI9k

Length: 27min 30sec (1650 seconds)

Published: Mon Nov 18 2019