# Market Data Levels: Level 1, 2 and 3

> Level 2 data shows bids and offers at multiple prices beyond the best quote. Learn level 1, 2 and 3 data, how to read depth, its limits and how traders use it.

Source: https://learn.tradelabsai.com/programming/level-2-data/  
Track: Programming and Data · Level: Intermediate · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Market Data Levels: Level 1, 2 and 3", https://learn.tradelabsai.com/programming/level-2-data/

Level 2 data, often called market depth, shows the orders waiting to buy and sell at several price levels, not just the best bid and ask. Where level 1 tells you the top of the book, level 2 shows the shape of the queue behind it: how much size sits one, two or ten ticks away. Traders use it to judge short term supply and demand, estimate how far a large order might move the price and spot where liquidity is thick or thin. It is a useful tool with real limits, because much of what appears in the book can vanish in an instant.

## Levels of market data

| Level | Shows | Typical users |
|---|---|---|
| Level 1 | Best bid and ask, their sizes, last trade | Most traders. See [Bid-Ask Spread](https://learn.tradelabsai.com/markets/bid-ask-spread/) |
| Level 2 | Aggregated size at each price level on both sides | Active and day traders |
| Level 3 (market by order) | Every individual order, with order IDs, plus the ability for members to enter quotes | Market makers and exchange members |

Names vary by market. In US equities, "Level 2" often means quotes from each market maker and venue; in futures and crypto, it usually means aggregated depth by price.

## Reading a depth ladder

| Bid size | Price | Ask size |
|---|---|---|
| | 100.04 | 2,600 |
| | 100.03 | 900 |
| | 100.02 | 1,200 |
| 800 | 100.01 | |
| 1,500 | 100.00 | |
| 4,000 | 99.99 | |

The best bid is 100.01 for 800 and the best ask is 100.02 for 1,200, a one cent spread. A buyer wanting 3,000 shares immediately would take 1,200 at 100.02, 900 at 100.03 and 900 of the 2,600 at 100.04. See [The Order Book and Market Depth](https://learn.tradelabsai.com/market-structure/the-order-book-and-market-depth/).

**Example: Estimating the cost of a market order**
Using the ladder above, a market buy of 3,000 shares fills 1,200 at $100.02, 900 at $100.03 and 900 at $100.04. The total cost is $120,024 plus $90,027 plus $90,036, or $300,087, an average of $100.029 per share. Compared with the best ask of $100.02, that is about 0.9 cents per share of extra cost, roughly $27 in total, before fees. Level 2 lets you estimate this impact before trading, and choose limit orders if it is too high. See [Market Impact](https://learn.tradelabsai.com/orders/market-impact/) and [Market vs Limit Orders](https://learn.tradelabsai.com/orders/market-vs-limit-orders/).

## What traders look for

- **Large resting orders** that may act as short term support or resistance.
- **Imbalances** between bid and ask size near the top of the book.
- **Thin areas** where price could move quickly with little volume.
- **Absorption:** heavy selling that fails to push price lower because bids keep refilling.

## The limits of level 2

| Limit | Why it matters |
|---|---|
| Orders can be cancelled instantly | Displayed size may not be there when you trade |
| Hidden and iceberg orders | Real size can be larger than displayed. See [Hidden and Iceberg Orders](https://learn.tradelabsai.com/orders/hidden-and-iceberg-orders/) |
| Fragmented markets | US stocks trade on many venues; one venue's book is incomplete. See [Exchanges](https://learn.tradelabsai.com/market-structure/exchanges/) |
| Spoofing | Illegal fake orders placed to mislead. See [Spoofing and Layering](https://learn.tradelabsai.com/industry/spoofing-and-layering/) |
| Speed | Retail feeds may update slower than professional ones |

Depth is best treated as context, not as a promise of liquidity.

## Level 2 in code

Programmatic depth feeds send a snapshot of the book, then a stream of updates that add, change or remove size at each price. Keeping an accurate local book requires processing every update in order and rebuilding when a gap appears. See [Order Book Feeds: Snapshots and Incremental Updates](https://learn.tradelabsai.com/programming/order-book-feeds/) and [Sequence Numbers, Dropped Packets and Out-of-Order Messages](https://learn.tradelabsai.com/programming/sequence-numbers/).

## Cost and access

Stock exchanges usually charge for depth data, and brokers pass on these fees or include them in premium plans. Crypto exchanges typically provide depth data free through their APIs. See [Market Data Fees](https://learn.tradelabsai.com/orders/market-data-fees/).

## Frequently asked questions

### What is level 2 data?

Market depth data showing the size of buy and sell orders at multiple price levels beyond the best bid and ask.

### Is level 2 data useful for day trading?

It can help judge short term liquidity and order flow, but displayed orders can be cancelled or hidden, so it should be combined with price action and volume.

### What is the difference between level 2 and level 3 data?

Level 2 usually shows total size at each price; level 3 shows each individual order and is mainly available to exchange members.

Next, learn how trade data becomes candles in [Tick Data and OHLCV Data](https://learn.tradelabsai.com/programming/tick-data-and-ohlcv-data/).

## Continue learning

- Next lesson: [Tick Data and OHLCV Data](https://learn.tradelabsai.com/programming/tick-data-and-ohlcv-data/)
- Previous lesson: [FIX Protocol](https://learn.tradelabsai.com/programming/fix-protocol/)
- Related: [FIX Protocol](https://learn.tradelabsai.com/programming/fix-protocol/): FIX is the standard messaging protocol for institutional trading. Learn how FIX sessions, messages and tags work, a sample order message and when traders use FIX.
- Related: [The Order Book and Market Depth](https://learn.tradelabsai.com/market-structure/the-order-book-and-market-depth/): The order book lists every waiting buy and sell order by price. Learn to read market depth, what imbalances show, spoofing risks and how depth affects fills.
- Related: [Order Book Feeds: Snapshots and Incremental Updates](https://learn.tradelabsai.com/programming/order-book-feeds/): How exchanges publish order book data as snapshots and incremental updates, and how to build and maintain an accurate local order book in code without errors.
- Related: [Market Data Explained](https://learn.tradelabsai.com/alternative-data/market-data-explained/): Market data covers trades, quotes, order book depth and reference data. Learn the main types, levels of data, real time vs delayed feeds, costs and common pitfalls.
- Related: [Hidden and Iceberg Orders](https://learn.tradelabsai.com/orders/hidden-and-iceberg-orders/): Iceberg orders show only part of a large order; hidden orders show none of it. Learn how they work, their priority trade off and how to spot icebergs in the book.
- Related: [Spoofing and Layering](https://learn.tradelabsai.com/industry/spoofing-and-layering/): Spoofing and layering use orders placed with no intent to execute to trick other traders. Learn how they work, how they are detected, key cases and the law.