How L2 Works
Trading on L2 Dealer is focused on the 'L2 Screen' which shows the full market depth for a stock. The quick example below shows how you might consult an L2 Screen and place a trade on Barclays .
For a full guide to trading with L2 Dealer, download our L2 Trading Manual:
- L2 Trading Manual PDF (8.5MB) (or click here for low-res version)
Example: a trade in Barclays
Say Barclays is currently trading on the LSE at 577/578.
You decide to view Level 2 prices for the stock, using L2 Dealer to see the full market depth of orders to buy and sell.
(Click images for full versions)
Judging from the weight of existing orders, you choose to place an order to buy 10,000 shares inside the market spread at 577.5.
Your deal ticket is accepted and the order now appears on the order tracking screen.
Your order is initially flagged as waiting to be filled. After a brief wait the order is filled and a CFD is automatically created to reflect your new position. (Of course there is no guarantee that your order will be filled, and you can cancel a live order from the order tracking screen at any time.)
You now have a position in 10,000 Barclays shares at 577.5, for an initial margin outlay of 10,000 shares x 577.5 x 5% = £2887.50.
Closing your position
Over the following day the market price of Barclays steadily rises and you decide to sell. Using L2 Dealer you see that there is sufficient volume of buying orders for you to sell 10,000 shares at 583. You place an order to sell.
Your order is matched and your corresponding CFD position is automatically closed. You have made a profit on the trade of 583 - 577.5 x 10,000 shares = £550.
To calculate your overall profit you would also have to take account of the commission on your CFD trade and any interest and dividend adjustments while your CFD position is open.