In this video, Ross from Warrior Trading explains the time and sales window on Lightspeed Trader. This goes hand in hand with the level 2 window on the trading platform. This allows traders to see what other traders are doing with a specific stock, and whether they are buying or selling.
Hey everyone. Ross here from Warrior Trading. In this video, I'm going to talk about time and sales window.
Now, the time and sales window goes hand in hand with reading the level two. You may have heard an expression called tape reading or old ticker tape machines. Ticker tape machines were the machines in the late 1800-1900's that would print out the last price of a stock, and so from anywhere in the world, if you had a ticker tape machine, you'd be able to see the last price coming through of the stock. It came out on paper kind of like the size of a tape dispenser.
Now as I look at level 2 up here, what I'm seeing is the current best buyer and the current best seller, and then right next to it I see the time and sales window and that shows every individual transaction that goes through. They really go hand in hand, because it allows you to see as people are buying and as they're selling. Let me show you a few examples and I think it'll make it a little bit clearer.
As we look at this stock, let's put up Apple ($AAPL) here, a more thickly traded stock, you can see this window here. This is level 2 on the left and this is time and sales on the right. This time and sales window is a small one. From the Lightspeed new window, you can go down to time and sales right here and open up the full window. As I scroll this down, this is going to literally show me every order that goes through. And so, as you're looking at the current price here, 26, 29, you see how that price suddenly popped from 29 up to 30? Well, those were the green orders. Those were people actually buying the shares that were for sale at 28 and 29. These are people actually buying the shares that were for sale at 31 and 32. When we see all of that green, that helps you visualize the market sentiment. On the flip side, when a stock is dropping and you see a lot of red, you're seeing the very bearish market sentiment.
So, if you are looking at the market, the level 2 without the time and sales right next to it, it would be like driving with one eye closed. You would just have such a difficult understanding of really what's going on here, and I'm trying to get this to cover that, but you would see this moving around. You would see the buy orders going up and down, the sell orders going up and down, but by itself you wouldn't be able to really translate are there actual transactions that are going through or are people just changing the size of their buy and sell orders? Because remember, in some of these stocks, more than 80% of the volume is algorithmic trading, it could be computer systems changing their order size, placing orders and canceling orders. So, without seeing the time and sales, you don't know for sure that actual transactions are going through.
So this feels like you're really only seeing one side of the equation and now we pull this back and we're going to see the other side. We're going to see all of this market data, and now you're realizing these are the orders that are actually going through.
Here, we've got a 4,500-share buyer down there, I believe it was around 17. Now, the buyers moved up to 22, 23. Okay. That buyer got taken out as these people sold shares into that price. When you're watching all of this market data, when you're watching it without also looking at charts, you're also kind of in tunnel vision here. You need to be looking at the chart to understand really the context that this price action is occurring within. This is a screenshot I took earlier.
Let me just close this a little bit and show you this 5-minute chart. Now when we're looking at the chart of the stock, what we see is the stock has dropped down and right now is sort of consolidating near the lows, and so the level that would be really critical would be will it break over 140, 250 and start to move back up? Then in that case, we'll see a lot of green most likely as we break through that level. Or is it going to break below 142 and show continued weakness as we get closer to the market close and the end of the day? Having these charts will also help you because if you're looking at this and you're expecting it to break the lows, if it breaks 142 right here, we're going to expect a lot of selling as we break through low of day.
So, we're kind of watching this level of 142. What's the price going to look like when it breaks? Will we see that big flush, a drop down to 143.90, 143.85? How far might it drop? Right now, it's testing this level. You see there's a little bit of bid support, there's some buyers, a couple of little pops up off this level here. Then as it continues to retest that 142 level, that's where we would potentially expect a break. Looking at time and sales separate from level 2 is also very difficult. These things really all go hand in hand, but you need to be able to understand each of the components: the level two here, the chart here, and the time in sales here. I sort of consider this to be, like in a driving analogy, this is me looking out the window, and this is me checking my mirror, and this is me checking my mirror, so I'm constantly looking at the current price here and then looking back and forth.
This actually might be the whole front of the window. This is the whole window and I'm looking here, and I see, oh there's a bicycle coming here, and there's a car over here, so I'm looking at all of this and then this is maybe the mirror. I check my rear-view mirror. What was the historical price like? Okay, I see what's going on, and now I've got to look back to the road in front of me. We're coming back down towards that 142 level. That's the level that I'm concerned that if it breaks, it could sell off. Now let's check the mirror. The last time it did this, it consolidated and then it ended up bouncing up, so maybe that is a possibility.
Where did find resistance? It was at this blue line. Okay, so I'll keep that place in mind. But geez, this is really kind of consolidating lower. I'm seeing the red on the time and sales. I'm still going to watch that 142.15 level, that 142 level, because if it breaks that level, I think there's a good chance it's going to flush down, maybe down towards 141, 141.90, 141.85, or something like that.
This is kind of what I'm looking at when I'm trading. You know, I'm looking back and forth between the level 2, the time and sales, the chart, and trying to get a sense of current market sentiment. On this stock, I'm still watching here wondering on this test of 142 is it going to flush down, is it going to break or is it going to catch a little support and curl back up?
This is a period of a little bit of consolidation. Sometimes we would call this a little bit of a tug of war. There's a little support around 142. It keeps coming down to the level then getting absorbed. That was a big burst of buy orders right there. You know, a little pop back up. But I think the longer we watched this and the more consolidates in this area, the technical pattern that we're seeing here is a bear flag. This is a bearish pattern and the resolution to a bear flag is a drop and a break below the low of the pattern, which would be below 142, really 142.
All right, so I hope this video has helped you really visualize what the time and sales looks like. This is something I use every single day while I'm trading. I would not be able to trade without it. It is so critical to the way I look at the market and understand what's happening in the market. All right?
As usual, any questions, feel free to reach out and I hope you enjoyed this video.
In this video Ross, from Warrior Trading talks about the types of accounts available to online active traders. He discusses the differences between margin, cash, and retirement accounts when opening an account with their U.S. online broker.
In this video Ross, from Warrior Trading, walks active traders through how to enter an order in an order entry window on Lightspeed Trader.
Lightspeed is a division of Lime Brokerage LLC. Lime Brokerage LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.