Tag: Level 2

Update on My Trading Setup and Strategy

As we begin the new year, I wanted to provide you with an update on my trading strategy and the adjustments I’ve made to my trading screen, which I believe will enhance our efforts moving forward.

Recently, I’ve dedicated time to organising my trading screen to improve my workflow. This organisation enables me to better monitor potential stock opportunities and respond to high-priority trades as they arise. Although I’ve been experimenting with various timeframes, setups, and indicators, the objective is to refine my approach to prioritise ‘A’ list trades.

The adjustments primarily revolve around the Level 2 and tape information, which remain consistent with my previous setup. I have repositioned my information and context charts to the right of the tape, which seems promising. These charts help identify trends across specific timeframes using a single Exponential Moving Average and a Wilder line, enabling a clearer view of market dynamics.

On the left side of Level 2, my primary entry chart is now a 1-minute or 2-minute timeframe. Data from my Tradervue results indicate that these timeframes yield higher success rates than shorter periods, such as the 10- or 15-second charts, which is encouraging and aligns with my overall strategy.

Additionally, I’ve incorporated the Relative Strength Indicator (RSI) with key thresholds at 80 (overbought) and 20 (oversold) to better gauge market conditions. I have found valuable insights from Garrett Drimon of SMB Capital that have reinforced my decision to include this indicator.

To maintain clarity, I keep my charts simple. The entry chart displays only the Average True Range (ATR) and the Volume Weighted Average Price (VWAP) line, avoiding clutter and making decision-making easier.

In sum, as a short-term momentum trader, these enhancements to my trading setup will provide greater clarity on entry points and reinforce our trading strategy. The depth of trends shown to the right of Level 2, coupled with indicators to the left, will aid in identifying optimal setups. VWAP with session anchoring I’ve always included; however, the ATR dynamic stop-loss management is a new approach.

January 11, 2026
Let’s quickly review my trading style.

October and November markets were slow months, to say the least. The S&P 500, for example, was in negative territory for most of this period, struggling to hold above the 50-day moving average. Not ideal when I trade long only, by choice. That said, things have changed for the better recently, with a hesitant yet rising market. Let’s see how that manifests as we go into the New Year.

Turning a small account into a big one within a reasonable timeframe has required a slightly modified approach. At the same time, we don’t want to risk the account unnecessarily or wildly. No point in putting in all the time and effort only to experience, at some point, a damaging drawdown. Therefore, what and how I trade matters.

With a larger account, I’d trade stocks in the $3- $30 range. I would also, where I could, add to a trade as and when it arose. That is very different when the account is small. Small is relative, in this instance under £10,000, and probably anything up to $25,000, depending on market conditions. Thereafter, I’d have the flexibility to play across a broader range of stock prices.

While the account is in the small range, I’m ideally looking for appropriate stock trades in the $1.5-$4 range. Why? Well, with a small account, I’m pretty much limited to a single trade per day. That brings its own challenge. Patiently waiting for the trade of the day, but not hesitating when it arrives, even if that is in the first few minutes of my day—rare, but it does happen.

The small account needs to grow, ideally, at 10% per day. If I take, say, 100 shares of a $20 stock, I’d need to be confident of a whole two-dollar increase in share price to achieve my daily goal. Not factoring in the spread and trading costs. With a $2 stock, however, in which I purchase 1,000 shares, I need that stock to rise by only 20 cents.

A small account only gives me one throw of the dice per day, so where I can, I will weigh it to our advantage. That is fine in theory, but in practice, I have recently taken higher-priced stocks as other opportunities were not happening.

The level 2 platform is essential for me, even with ‘tape’ spoofing and so-called icebergs. Not so much in the lower-priced division, but they are still prevalent. Level 2 is only one trading mechanism; for me, it harmonises with charts and fundamentals. In charts, I removed the bars for a while, showing only indicators, so I forced myself to balance the chart information with the level 2. That helped, and I will do it again from time to time where my personal recalibration is needed.

Let’s quickly review my trading style. It is a very short-term reaction to potential bullish movements in specific stocks. Specifically, what are known as low-float stocks? Those are stocks that, in most cases, have less than 10 million shares (the float) available and have a relative trading volume significantly above the available float.

I first screen potential stock candidates on the Trade Ideas AI platform by volume per minute. Thanks to ‘Bullish Bob’ for his help with programming Trade Ideas the way I like it.

Once a stock pops up on the scanner, I also like to see positive, relevant, and timely news associated with it. If the stock is associated with the pharmaceutical industry, crypto (when crypto is positive) or AI, so much the better. Of course, where the stock is based is a factor too.

A glance at my level 2 shows how active or inactive the stock is, along with factors like the spread and trading depth.

At this point, I study my bar charts. Firstly, the daily price relative to the daily 50- and 200-day simple moving averages. Not the most advanced technical indicator, but remarkably accurate at identifying resistance levels. Next, the 5-minute and 1-minute charts provide context and resistance levels, along with potential short-squeeze price levels. (They can sometimes be the 15-minute and 2-minute). Volume, particularly on the 1- or 2-minute chart, provides me with a green (good to trade) or red (don’t trade) flag.

Setups, however, are from the intraday chart, either the 15 or 10-second chart. I favour the 15-second at the moment, but that can change with volatility. I cannot stress the need for a credible setup enough.

As I am, for the most part, a momentum trader, I usually buy via hotkeys at the offer price and, conversely, sell at the bid price.

After that, it’s over to level 2. Watching the number of bids and offers coming in, the movement, if any, in the spread, the bid and offer (or ask) price and how it is reacting to certain price levels, combined with the rapid, or otherwise, movement of the time and sales.

All tells a story that allows us to fleetingly look into a possible future scenario with level 2 and judge the reaction to, and what is happening right now, through time and sales.

Side note. A couple of months ago, I moved the blog’s domain to WordPress. In the process, I lost over 660 posts. Retrieval via the Wayback Machine (web.archive.org) is possible, but it requires extensive copying, pasting, and reformatting.

December 14, 2025
1st month of the 12 month challenge.

I am trading US stocks through the Lightspeed platform. Although there are commissions to pay with Lightspeed, it is a solid platform, and trades execute immediately, unlike many commission-free sites. As a day trader, the immediacy of trade execution is essential.

October was a relatively slow month. Additionally, I had a project to complete: redesigning an area of the business into a guest gym. However, I still managed to trade for at least half of the month, and took trades on only six of those days.

In my preferred trading range of $2 to $20 per share, movement, apart from one stock that skyrocketed and I missed, has been light.

As I build the fund, starting with only $2,500, I must be cautious that fees do not significantly exceed the profits; this requires me to consider my trading style carefully.

Please note that I am buying and selling actual shares, which differs considerably from leveraged derivative trading. Once I enter a trade, even if I hold it for only a few seconds, the full cash commitment is not available again until the following day, regardless of whether the trade is a win or a loss.

Selectivity in trades is crucial, but so is commitment. Not all trades are equal. Where able, I try to gradually build my commitment to a trade as its suitability becomes clearer—a much more challenging skill than it seems, which is why most of us tend to make a single entry.

Additionally, I try not to overstay my welcome in a trade. I focus on exiting when the trade weakens, but I always look for a re-entry if the market conditions suggest it—a challenging balance to keep.

My results, however, indicate that I tend to exit trades that are likely to maintain momentum too early, which is an area I need to improve.

To that end, I have recently shifted my focus away from price action trading. As someone who has long advocated for this approach, I found myself prioritising candlestick patterns and price movements over the tape.

By “tape,” I mean both level 2 data and time and sales information. By eliminating candlestick charts and instead using exponential moving averages, along with a session volume-weighted average price across several timeframes, I could still identify a justifiable entry signal, while entirely focusing on analysing the tape.

Furthermore, focusing more clearly on the tape has significantly reduced my drawdowns, but it is still early days.

The profit results from last month are inconsequential, but we are prepared to capitalise on any long-only volatility that may emerge.

The lower screen shows three Lightspeed level 2 displays and their associated time and sales. The upper screen displays four charts of the same stock over different time frames, absent the usual bar chart.

Fund at $2,588, a 3.4% increase. It’s a start!

November 5, 2025