What are Level 1 Quotes?

Level 1 quotes are a type of quote for a stock that provides three basic data points: 

• The last price traded
• The current highest bid price
• The current lowest ask/offer price

They’re called “level 1” quotes because there’s three levels of quotes in the US stock market. Level 1, obviously, is the most basic of quotes. Let’s do a quick review of the three levels of stock quotes: 

• Level 1 quotes: “top of book” – the last price, bid, and offer
• Level 2 quotes: “entire book” – the entire consolidated limit order book. All bids and offers and their respective routes and routes.
• Level 3 quotes: a specialized quote system which provides access to the entire order book like level 2, but with additional information like the client name behind the order, the type of order, etc. This is a very expensive feed that is only available to broker-dealers. The vast majority of traders will only ever have access to level 1 and 2 quotes.

Level 1 quotes are the most common types of quotes that traders deal with. When you do a Google search for a stock like Apple, you’ll get a level 1 quote: the last price, the bid, and the offer. Anytime you see a singular price, that’s the “last price,” and simply refers to the most recent price at which a trade occurred in the given stock. 

Even most premium charting packages like TradingView and TC2000 still only deal with level 1 quotes. The prices you see on the chart are a historical feed of the last price, and you’ll usually see a data window on the side of the chart that gives you information like the bid and offer prices. 

How to Get Level 1 Quotes?

Nowadays, the vast majority of US-based stock brokers offer free level 1 quote data to clients. We’re talking big brokers like TD Ameritrade, ETRADE, Schwab, Robinhood, etc. Some niche brokers like those that cater to highly active day traders and whatnot might charge you a modest monthly fee for quotes, however.

Things get more sticky when it comes to third party software like charting platforms and scanners. Oftentimes, it depends on the size of the company, their pricing strategy, and the quality of data needed for the product. 

Some basic stock screeners that only require end-of-day data will usually not charge you for data and instead factor in the modest pricing into their monthly subscription fee.

Then we come to the question of the quality of quotes… 

The Quality of Level 1 Quotes

When you get a subscription to level 1 quotes, whether through your charting platform like TradingView or your broker, you’re not necessarily always getting the same product. 

You see, the stock market is pretty fragmented. There’s dozens of exchanges where trade takes place, with different orders coming in, etc. All of this fragmentation creates several different data feeds. For this reason, there’s a quality spectrum in the quote feed you’re getting. I divide it into three basic categories: 

• Delayed feed: these are quotes that are delayed by 15 minutes. Almost always free
• Free real-time quotes: this is usually a feed from a singular feed. TradingView’s free feed is from the BATS exchange, for example.
• Paid: access to either a collection of several exchange feeds or a consolidated feed of some sort

The drawbacks of the delayed feed are obvious. But the difference between free real-time feeds and paid ones are important too. Free real-time feeds often aren’t complete, as we said they’re typically from one exchange, meaning that you’re cut off from some data. These free quotes often will do the job for less active swing traders and investors, however, as the second-to-second changes aren’t all important. 

Paid quotes are essential for any serious active trading as you’ll need the most accurate and fastest data feed to execute on your trades effectively. 

Level 1 Quotes vs. Level 2 Quotes

The information differential between level 1 and level 2 quotes is significant. Level 2 quotes give you access to the entire order book, which is the consolidation of all resting limit orders sent to different exchanges.

Most active day traders require level 2 quotes either as part of their daily trading or at the very least, as an additional indicator. Oftentimes traders can spot things in level 2 that simply don’t show up in price, like a buyer or seller that continually refreshes their quote, defending their position. 

How To Use Level 1 Quotes

Primarily, you’d use level 1 quotes to know where the price is, but that much is obvious. 

But the less apparent use is to identify the bid and ask prices, specifically the spread between the bid and ask prices, known as the “bid/ask spread.” The bid/ask spread refers to the “true” price of a stock. The last price just tells you where the last price was traded, but the best bid/ask tells you where you can currently buy or sell the stock.

To understand the utility of the bid/ask spread, you need to know a little bit about how the stock market works on a mechanical level. The stock market is an auction system. It’s made up of a series of buyers bidding and sellers offering. When two of these orders agree and are at the same price, a trade occurs.

However, many of these orders don’t have a corresponding trade, so they “rest” in the stock market on what’s known as the order book, waiting for another trader to trade with them. 

All of these “resting” orders can be seen in real-time with level 2 quotes. While level 1 quotes display the basic factors like last price, bid, and ask, level 2 quotes give you a glimpse into the motivations of all trades that haven’t yet occurred. 

Of course, the caveat here is that analyzing level 2 data isn’t as easy as it sounds. The stock market is the most competitive field in the world, and hence, sophisticated traders use tricks and tactics to shield their true trading intentions. 

Bottom Line

Level 1 quotes are easy enough to understand. To summarize, a level 1 quote consists of three data points:

• Last price traded
• Best bid price and size (in shares)
• Best offer price and size (in shares) 

You might find that level 1 quotes are more than enough for your trading style, however, many do benefit from level 2 or even require it for their style.

It’s always worth getting a one month subscription to check it out. Of course the warning here is shiny object syndrome is always a risk in trading, and it can be risky to start adding things into your trading toolbox that don’t necessarily belong.