Stock Trading Lingo 101: Or What is Level 2/L2 Trading?

crazy stock trading lingo

Now that you are involved in trading stocks, still deciding, we want to make sure that you understand the lingo.

Did you know that January of 2012 was the best month for the stock market since 1997?

It is time to learn and learn quickly, so that you are ready to take advantage of this bull market!

(Bull market means lots of  investor confidence, and generally increasing stocks. A bear market 

is a general decline in the market, and investor fear and pessimism. )

It is crucial that you understand and can speak the language!

Stock Certified is here to help! Presented below is your first, free Stock Trading Lingo 101 lesson:


First of all, let’s use the K.I.S.S Formula– aka Keep It Simple Stupid


So what is the meaning of  L2 / Level 2? 

Basically it’s an auction– but don’t make this rookie trader mistake:

Stocks DO NOT have one price, they have two prices.

There is a price to sell and a price to buy.

Three Key Things:

Let’s compare it to goring to an estate auction:

  •          The Stocks – the antique at an auction
  •          The Buyers – the bidders aka “the bid”
  •          The Seller

What is a Market Maker?

Answer: They represent their clients, in much the way a lawyer might represent you.

A market maker profits by selling high and buying low. They establish the quotes so

Don't Understand How To Talk Like a Stock Trader?

that the bid price is just slightly lower than prices listed, and the ask price is slightly

higher– thereby profiting on the small margin. Essentially, market makers act as

stock wholesalers, and they keep the market fluid by buying and selling at quoted


The client the market maker works for could be a hedge fund, average Joe or large stock traders.

Have you seen these yet? Night / Auto / ETMM / ARCA / HDSN

These are NOT ticker symbols; they are “market makers” that represent the client.

For instance, ETMM represents E-Trade.


What is the  spread?

This is the average for people that want to buy based on what they are bidding to pay.

VS  the average of what people want to sell.

You can also look at this as the difference between the highest bidder and the lowest priced seller.


Still with us so far?  Great…now let’s keep the stock talk lingo going!


A Little L2 Lingo

Slapping The Ask” or “Hit the Ask”  means you are willing to pay the difference in the spread. (Highest price.)

Hitting the bid” or “bid whacking” or “whacking the bid” (the slang you’ll read on message boards like iHub)

–means that the seller goes direct to the buyer. This can cause a downward trend, so it something you don’t

want to see when checking your stocks. This could mean that there are little to none of the stocks with the

L2′s (the market makers)–demand is low and sellers might take what they can, in hopes of turning it around.

On stage”  means the lowest selling price or highest buyer in the auction to buy.

Okay– that is it for today! Not too bad for your first Stock Trading Lingo 101 lesson… bookmark or follow

us for regular lessons.


Stock Certified takes this entire process to a whole new level by leveraging social media tools to predict 

winning stocks to pick and buy before the market turns!


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