Savvy investors know how penny stock quoting systems involve far more more than the stock quotes on the evening news. When someone sees a general stock quote on the news they generally get the closing price at the end of day market bell. This is really only a small piece of the puzzle for pricing a stock.
If you are a long term buy and hold investor this may work fine for you or if you are just casually watching the financial world while your mutual fund managers do the work you’ll probably be just fine, however if you think you want to trade stocks this is woefully inadequate. You really need to delve into the different available penny stock quoting systems.
Level I Stock Quotes
Level I stock quotes are like the information you get from the news only you can get them real time. These stock quotes give you the current highest bid and lowest ask price (often called the inside market quote.) You will always get this information with any online stock brokers and it doesn’t require any special registration.
Level II Stock Quotes
Level II stock quotes add a few features to the level I stock quotes. They add the market maker, order size, and time for the transactions. If you know a certain market maker tends to be very successful with a stock you are interested in you can sort the stock quotes by their buy and sell activity. If you want to know where market makers are setting their limit orders, Level II stock quotes maintain this information as well. This type of quoting system used to require specialized hardware and stock market software, but it is now regularly available by streaming over the internet.
Level III Stock Quotes
Level III quotes are everything level I and level II are except you get the ability to execute orders and send out notices that a trade was executed. Essentially this is the raw trade data going right to the brokers, exchanges, and market makers. The level II and level I quotes are filtered down from this information after it has happened. If you can gain consistent access to Level III penny stock quotes you’ll have a much greater chance of determining for yourself which penny stocks to watch.
So Which Penny Stock Quoting Systems Will You Use?
Hopefully you’ve seen the trend with each level of stock quote. How fast you intend on trading or how volatile the stock is that you intend on trading the higher level of stock quote you will need. If the price movement under five minutes is important to your penny stock trading strategy or if you suspect that news is greatly going to change the direction and momentum of a penny stock then you’ll want level II quotes. Getting the information of what the first movers and shakers are asking or bidding on stocks is a huge indicator for the day trader as far as what he or she plans on doing.
If you plan on scalping nickels off a penny stock then you’re going to want to have a good feeling of the direction of new orders. However, if your time frame is more like weeks or months, than standard level I quotes or quick checks on Google finance should be more than adequate. If you intend on creating a computer program that will move millions of dollars around you may want to pay the extra money and schmooze a few Wall Street friends to get level III quotes.
For most people the simple bid / ask spread is more than enough information to keeping their trades humming along. Be careful of becoming a tick watcher without action. If your strategy is designed for hourly price averages than watching the minute by minute orders will not do your strategy any good, but will instead add unneeded emotion to your trading style. Information overload can cause new and experienced traders alike to overreact to a situation that will seem like it never existed one minute later. If you’re just now learning where to buy penny stocks and how to trade penny stocks than you need to appreciate the vital importance of emotional discipline in stock investing.
I hope this helps you better understand how penny stock quoting systems are critical to proper penny stock trading.