At 10:40 on Wednesday, Sam watched XYZ poke above $53.75 on a 9,000-share VolumeVolume is the total number of shares (or contracts) traded during a given time period — it's the primary confirmation tool for all price action, because a price move accompanied by high volume indicates genuine market participation, while tRead definition → bar and slide back inside the RangeA range (or trading range) is a price zone where a stock oscillates between a defined support floor and resistance ceiling without making meaningful new highs or lows — price is consolidating rather than trending, and the dominant trade is Read definition →. Lesson 29: Volume Analysis taught him to distrust that quiet bar. But the bar was a five-minute total. What actually happened inside it?

Who was waiting to sell at $53.75? Did anyone pay up above it, or did the price just drift there? Were the trades big or tiny, fast or slow?

Two windows on his broker's demo platform answer exactly those questions. They had been sitting in a menu he'd never opened: Level 2 and Time & Sales.

In 30 seconds

  • Level 2 (the order book) shows the waiting buy orders (bids) and sell orders (offers) at several prices around the current price, with the number of shares at each.
  • Time & Sales (the tape) is a live list of completed trades, each with a time, price and size.
  • Level 2 shows intent: orders can be changed or canceled at any moment, and some size is hidden. The tape shows what actually traded.
  • Beginners get the most from these windows by using them to watch how price behaves at a level they already marked on the chart; they're a poor place to find trades.

In this lesson you'll learn how to read a Level 2 window, how to read the tape, why the two can tell different stories, and how a beginner should use them. If you're new, start with Lesson 25: Liquidity and Volume, which introduces the spread and size at the quotes.

What is Level 2?

Level 2 is a live display of the order book: the buy orders and sell orders waiting at several prices above and below the current price, with the number of shares at each. It's sometimes called market depth.

A basic quote, often called Level 1, shows only the best BidThe bid is the highest price a buyer is currently willing to pay. When you sell with a market order, you receive the bid price.Read definition → (the highest price a buyer is offering), the best offer (the lowest price a seller will accept), their sizes and the last trade. Level 2 adds the queue behind them.

Picture a farmers' market. Level 1 tells you the cheapest apples are $1.50 and someone will pay $1.48. Level 2 shows the whole market: a few buyers lined up at $1.48, $1.47 and $1.45, and stalls asking $1.50, $1.52 and $1.55, with how many apples each one wants.

The data comes from exchanges, and how much depth you see depends on your broker and data package. In 2020 the SEC adopted rules to add some depth-of-book data, quote sizes for the next five price levels beyond the best quotes, to the market data widely distributed to investors, with a phased rollout (SEC). Many brokers include a Level 2 window; some charge for fuller depth.

How do you read a Level 2 window?

You read a Level 2 window as two ranked lists facing each other: bids on one side, highest first, and offers on the other, lowest first. The top row of each side is the current best bid and best offer, and the difference between them is the spread.

Here's a simplified example for XYZ (hypothetical):

Bid size
1,200
Bid price
$53.74
Offer price
$53.75
Offer size
6,000
Bid size
2,500
Bid price
$53.73
Offer price
$53.76
Offer size
1,500
Bid size
3,100
Bid price
$53.72
Offer price
$53.77
Offer size
2,200
Bid size
20,000
Bid price
$53.70
Offer price
$53.80
Offer size
4,800
Bid size
1,800
Bid price
$53.69
Offer price
$53.82
Offer size
3,000

What a beginner can read from this:

  • The spread is 1 cent ($53.74 to $53.75), so XYZ is liquid right now. Lesson 34: The Bid-Ask Spread covers what that costs you.
  • 6,000 shares are offered at $53.75. For price to trade above $53.75, buyers have to take all of them first, or those sellers have to leave.
  • A big bid sits at $53.70. 20,000 shares is far larger than its neighbors, which is why traders notice levels like this. Whether it stays there is another matter.

Each row may also show a short code for the exchange or market participant posting the order. You can ignore those for now; Lesson 45: Market Makers and Order Flow explains who they are.

One practical trap: some platforms show size in round lots of 100, so "60" can mean 6,000 shares. Check your platform's setting before reading anything into a number.

What is Time & Sales?

Time & Sales, often called the tape, is a live, scrolling list of every completed trade in a stock, each showing the time, the price and the number of shares. Each line is called a print.

If Level 2 is the restaurant menu and the line of people deciding what to order, the tape is the stack of receipts. Every line on it really happened.

Most platforms color each print by where it happened relative to the quotes at that moment: a print at the offer usually means a buyer was eager enough to pay the seller's price, a print at the bid means a seller was eager enough to accept the buyer's price, and prints between the two are often shown in a neutral color. That's the same idea researchers use to estimate which side started each trade. It's an estimate, and trades inside the spread are hard to classify (Lee and Ready, 1991). Color rules differ by platform, so check yours.

Time
10:12:04
Price
$53.75
Size
500
Printed at
Offer
Time
10:12:04
Price
$53.75
Size
1,000
Printed at
Offer
Time
10:12:05
Price
$53.75
Size
1,200
Printed at
Offer
Time
10:12:05
Price
$53.76
Size
800
Printed at
Offer
Time
10:12:06
Price
$53.75
Size
300
Printed at
Bid

How do you read the tape?

You read the tape for three things: which side most prints are hitting, how big they are and how fast they're coming.

Side. A steady run of prints at the offer means buyers keep paying up. A run at the bid means sellers keep accepting less. A mix with no clear pattern means nobody is pressing.

Size. Most prints in a liquid stock are small. Many platforms let you hide prints below a size you choose, so a burst of larger prints stands out. Size alone doesn't tell you who's trading, since big orders are often split into small pieces.

Speed. A tape that suddenly speeds up at a level you've marked means more traders are acting there at once. On a five-minute chart, you'd only see that when the volume bar finishes.

Put together with Level 2, this is how you watch a level being tested: is the size offered at $53.75 shrinking as buyers take it, or getting refilled as fast as it's taken?

Why can Level 2 and the tape tell different stories?

Level 2 and the tape can disagree because Level 2 shows orders people are offering to trade, which can be changed, canceled or partly hidden, while the tape only shows trades that actually happened.

Orders can vanish. A trader can cancel a resting order in a fraction of a second. A large bid can disappear the moment price comes near it.

Some orders are fake on purpose. Placing orders you don't intend to FillA fill is the execution of an order — when your buy or sell order is matched with a counterparty and the transaction is completed, you've received a fill.Read definition →, to trick others into buying or selling, then canceling them is illegal manipulation, often called spoofing or layering. The SEC has brought fraud charges over it, describing schemes in which orders were placed and then canceled after tricking others into trading at artificial prices (SEC).

Some size is hidden. Exchanges let traders show only part of an order. Nasdaq, for example, offers a reserve-size option in which a displayed portion is refilled from a hidden reserve as it trades (Nasdaq rule filing). On the tape, that can look like trade after trade at the same price while the visible size never seems to shrink.

Some trading isn't on the screen at all. Part of every day's volume trades away from the public exchanges' order books, so it can show up on the tape without ever appearing on Level 2.

Level 2 shows what people say they'll do; the tape shows what they did.

How should a beginner use Level 2 and Time & Sales?

A beginner should use Level 2 and the tape to watch a level they already marked on their chart. Hunting for trades in the order book itself is a different, harder game. The chart tells you where to look; the order book and the tape show you what happens when price gets there.

A simple routine:

  1. Mark the level first on your chart, as in Lesson 22: Support and Resistance.
  2. As price approaches, glance at Level 2. How much is offered or bid at that level? Is the spread still tight?
  3. Watch the tape at the level. Are prints hitting it steadily? Is the size there shrinking or being refilled?
  4. Let the candle finish. The tape gives you a sense of what's happening; the finished candle and its volume bar confirm it.

Two cautions. In very large, heavily traded stocks the book refreshes so fast that it's hard to read anything useful. And in thin stocks, a single order can make the book look dramatic, which is exactly where fake orders do the most damage.

Where can you watch the tape being read live?

Reading descriptions only goes so far. Watching an experienced trader narrate a live screen during market hours shows you how these windows behave in real time, and you can do it for free.

Disclosure: This lesson contains affiliate links. If you buy through them, DayTradingToolkit may earn a commission at no extra cost to you.

The free Trade Ideas live trading room runs during US market hours: a moderator shares his screen and talks through his trades as they happen, with no credit card needed. It suits a beginner who wants to see real-time decisions before trying them in a demo account. Our guide to the Trade Ideas chat room explains how it works and who runs it. Treat what you see there as a lesson in how decisions are made. Copying someone else's trades teaches you very little.

Sam watches the tape (hypothetical)

On Thursday morning, Sam opens Level 2 and Time & Sales in Broker A's demo, beside his 5-minute chart. XYZ is back at the $53.75 ceiling. No orders.

Hypothetical: XYZ at $53.75 on Thursday

Illustrative example
  1. The setup

    Level 2 shows 6,000 shares offered at $53.75 and a 20,000-share bid at $53.70. The tape is slow: a few hundred shares every few seconds, mixed colors.

  2. The tape speeds up

    Prints of 500 to 1,200 shares start hitting the offer at $53.75, several per second. The 6,000 offered there shrinks to 1,500, gets topped up once to 3,000, then disappears.

  3. Through the level

    Prints appear at $53.76, $53.78 and $53.80. The 5-minute candle closes at $53.84 on about 70,000 shares, more than twice the recent average.

  4. The big bid that wasn't

    XYZ dips back toward $53.72. The 20,000-share bid at $53.70 is gone before price reaches it. Hardly any shares ever traded at $53.70.

His notes: "Offer got eaten, tape sped up, volume bar agreed. That's what a real break looked like today. The 20,000-share bid was never tested; it just left." He adds a line under his rules: "Level 2 is what people say. The tape is what they did."

Trusting a big order on the book

You're doing it if
You see a large bid and assume price can't fall below it, or a large offer and assume price can't rise above it.
The fix
Treat any resting order as a claim until trades confirm it. Watch the tape when price reaches it: shares actually trading there is evidence; an order that disappears first is not.

Your turn: read the book and the tape for 10 minutes

Level 2 and Time & Sales practice (10 to 15 minutes, no orders)

0 of 5 done

Check your understanding

Check your understanding

What's the key difference between Level 2 and Time & Sales?

Check your understanding

A 20,000-share bid disappears just before price reaches it, and almost nothing trades at that price. What's the most sensible conclusion?

Check your understanding

Your Level 2 window shows "60" at the best offer. What should you check first?

Key takeaways

  • Level 2 lists waiting bids and offers at several prices; the top rows are the best bid and offer, and the difference between them is the spread.
  • The tape lists completed trades with time, price and size; prints at the offer suggest eager buyers, prints at the bid eager sellers.
  • Orders on the book can be canceled, partly hidden or placed illegally to mislead, so treat them as claims until the tape confirms them.
  • Use both windows to watch price at a level you already marked, then let the finished candle confirm.

Frequently asked questions

Is Level 2 data free?
Sometimes. Many brokers include a basic Level 2 window, especially for active accounts, while fuller depth from specific exchanges is often a paid add-on. Check your broker's market data page, and remember you don't need paid depth to learn the basics in a demo account.
What is Level 3?
Level 3 refers to tools that let registered market makers and other authorized firms enter and update their own quotes. Retail traders don't use it; what you see and need is Level 1 and Level 2.
Does Level 2 show every order?
No. It shows displayed orders on the venues your data feed covers. Hidden or partly hidden orders and trades that happen away from public exchanges won't appear on the book beforehand, though their trades still show on the tape.
Is tape reading still useful when so much trading is done by computers?
It's less of a superpower than it was when people stood on trading floors, because algorithms split and hide large orders. It's still useful for a narrow job: seeing how actively a level is being traded at the moment price reaches it.
Do I need Level 2 to start day trading?
No. Charts, volume and a clear plan come first. Level 2 and the tape add detail at key moments once you can already read the chart, which is why this course introduces them after candles, levels and volume.

Up next: what if the 1-minute and daily charts disagree?

On Friday, XYZ's 1-minute chart shows a sharp drop at 9:50, and Sam's first instinct is that the stock is breaking down. The daily chart says it's still in the middle of a three-week climb, now sitting just above the old ceiling. One chart says down, the other says up. Which one should win, and how do you combine them? Lesson 31: Multi-Timeframe Analysis answers that.

Disclaimer

This lesson is for educational purposes only and is not financial advice. Level 2 shows orders that can be canceled, hidden or placed to mislead, and the tape describes past trades; neither predicts price. Watching others trade, including in a free trading room, is education, not a recommendation to copy any trade. All Sam examples and numbers are hypothetical. Trading involves the risk of loss, and nothing here guarantees any result. For our complete disclaimer, visit https://daytradingtoolkit.com/disclaimer.

Article Sources

This lesson relies on SEC publications, an exchange rule filing and peer-reviewed research.