What is level2 data

Level 2 data, also known as order book data, is a type of market data that provides more detailed information about the outstanding orders for a particular stock. It displays the bid and ask prices from multiple market makers and electronic communication networks (ECNs), offering a more comprehensive view of the market. Level 2 data includes:

1. **Market Depth**: It shows the bid and ask prices at various levels, giving traders insight into the supply and demand for the stock.
2. **Liquidity**: It indicates the market's ability to trade large orders without significantly impacting the stock price.
3. **Order Book**: It reveals the full range of open orders for a stock, including limit orders that could be executed if the price were to fall or rise.

Traders, especially active traders and high-frequency traders, often prefer Level 2 data as it provides more detailed insights into market dynamics and liquidity, which can help in making more informed trading decisions.