Scalping futures based on level 2 data


#1

Hello traders.
I had a doubt. I just wanted to confirm the fact that while scalping futures for 4-5 ticks, it doesn’t make sense to make use of level 2 data comprising of bids and asks because the future’s price is not affected by the orders placed, but is derived from the spot price of the instrument.
Am I correct about this?
I’m asking because a lot of people use level 2 for scalping futures and it just doesn’t make sense to me.
Thank you.


#2

Hi @Ronith_Sinha,

Trading by looking at Bids and Asks is not a great idea.

The reason is that this bids-ask data can be very misleading, especially in individual stocks. It’s because the big players have the ability to hide their position sizes (which will not show up in Bids/Asks) using the feature of “disclosed qty” and there are algos that sometime keep showing up “dummy orders” in order to mislead the smaller players.

You can read more about disclosed quantity in the article below. I recommend you to come up with better strategies for scalping, especially that are based on supports & resistances.

-Neha (vrdnation.com)