Level 1 Trading Screen: Real-Time Quotes and Accessibility

What Is Level 1?

A Level 1 trading screen provides real-time bid, offer, and volume quotes, known as the national best bid and offer (NBBO), allowing investors to gauge a stock's price and performance quickly. These quotes are widely accessible through online trading platforms, making them suitable for most investors. However, more active traders may prefer Level 2 quotes, which offer deeper insight into market activity and order flow.

Delving into Level 1 Trading Screens

Level 1 quotes were relatively rare before the advent of the internet and online trading, but are now widely offered, and investors can access them for free. These quotes can be found on brokers' websites as well as across financial news and media portals, such as Morningstar or Yahoo! Finance. The information is often provided directly by an exchange or through a data broker intermediary.

Reliable Level 1 quotes help investors secure better prices in fast-moving markets by preferring limit orders over market orders.

For instance, an investor planning to buy $1,000 in stock might use a Level 1 quote to check if they can purchase the full amount at a given price or if it will cost more.

Level 1 quotes are often enough for long-term investors who don't care too much about the price changing slightly. However, active traders looking to capture much smaller gains often use Level 2 quotes so they can gather more information.

Comparing Quote Levels in Stock Trading

• Level 1 quotes provide basic price data for a security including the best bid and ask price + size on each side.
• Level 2 quotes provide more information than Level 1 quotes by adding market depth. Level 2 shows market depth typically up to the 5-10 best bid and offer prices.
• Level 3 quotes add greater market depth by providing up to 20 of the best bid and ask prices. Users can also input data directly. These are primarily used by brokers and market makers.

All three levels of quotes build on top of each other. Level 1 quotes provide investors with the highest bid and the lowest ask prices for an individual stock. This will also represent the most recent data for the particular security based on the order book in an exchange. These types of quotes are the most common and are what individual investors see when they request information from their financial services company. Level 1 quotes provide the best real-time bid/ask for a given security.

Level 2 quotes go a step further by offering market depth to real-time quotes for each symbol. The added granularity helps active traders determine the magnitude of buy and sell orders at different prices (depth) and shows where most orders are concentrated among market makers (order book). This allows investors to identify the tightest, lowest bid/ask spread, which is important for larger investors who conduct high volume and high-frequency trades (HFT).

For example, suppose that an active trader sees that Acme Co. has a Level 1 quote showing a $5.00 price with a $5.10x100 ask and a $4.90x500 bid. The trader may assume there is strong support at $4.90 with an order for 500 shares and relatively weak resistance at $5.10 with just 100 shares on the market. However, Level 2 quotes may show an order for 1,000 shares at $5.11 and no orders below $4.90 until $4.85, which makes the stock look a lot weaker than the Level 1 quotes would imply.

There are also Level 3 quotes, which provide all the information and services of Level 1 and Level 2 quotes as well as granting an investor the ability to enter or change quotes, execute orders, and send out confirmations of trades. These types of quotes are reserved for registered brokers and financial institutions. Market makers, for example, participate in Level 3 quotes, which allows them to execute customer orders.

The Bottom Line

Level 1 quotes provide real-time data on the highest bid and lowest ask prices, giving investors essential insight for trading decisions. Widely available online at no cost, they serve most investors well, though active traders may rely on Level 2 for greater depths. As the foundation of the three-tiered U.S. market quote system, Level 1 data is an accessible and practical tool for monitoring market activity and making informed choices.