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real-time quotes. Any broker with a Web page gives those away. These days, the most progressive online brokers are offering Nasdaq Level II quotes. But unless you fancy yourself a day trader, chances are you haven't actually used these quotes. (In fact, it's OK to admit if you haven't even heard of them.) But for day traders, Level II quotes are as crucial as a computer screen. Should you shell out the $50 to $75 a month it costs to get them?

The Basics: Level I
To understand Level II quotes, you first have to understand Nasdaq Level I quotes. (Remember that old "walking before you can run" cliche?) Level I quotes simply show the best bid and ask prices for a Nasdaq stock. (Remember a "bid" is the price someone is willing to pay, while an "ask" is the price at which someone will sell.)

The Nasdaq Web site offers free Level I quotes, although the information is delayed 15 minutes. These quotes list the highest bid and the lowest ask prices for a stock. For example, we recently called up a quote for eBay. At the time, the highest bid was $150, while the lowest ask was $150.125. This range is called the "spread" or the "inside market." The remaining bids and asks (which are not as competitive) are considered "away from the market," and they are not included in Level I quotes.

Level II
Which leads us to Level II. These quotes offer a larger view of the market because they show all those offers that are away from the market bids and asks, and the quotes are constantly updated as new orders are placed on the system. Why is that information useful? Read on.

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Here is the top portion of a Level II quote on eBay from Tuesday morning, courtesy of E*Trade. (For the full quote, click on the icon in the top right corner of this page.)

Source: E*trade "pulse;" data provided to E*trade by Bridge Information Systems.

The yellow band across the top shows the best bid (153 1/16) and ask (153 1/2) prices waiting to be filled. Next to the bid and the ask are the names of the companies that are offering these prices. These companies may be market makers or electronic communications networks (ECNs), which are independent systems that match Nasdaq buy and sell orders. (For more on how the Nasdaq market makers work, see our Ask SmartMoney In this case, ISLD stands for Island, a well known ECN. And FAHN stands for Fahnestock & Co. -- one of the many eBay market makers.

Below the best bid and ask, you can see the orders that are considered outside the market. The left side of the screen shows the number of current bids; the right side shows the number of current asks. In the full quote, you would see those other bids and asks listed in descending order based upon their closeness to the market. As closer bid and ask prices become available, the "away from the market" prices move down in the quote. And, as trades are executed, the relevant bid and ask prices are removed from the quote.

The colors on a Level II quote, which vary with different service providers, also give information. In E*Trade's case, the blue prices are the best prices currently offered. Those in blue squares are new orders (but not necessarily at the best price). And those in black are orders that are outside the market.

Who Cares?
So what's the point of looking at a whole bunch of orders that may or may not be executed? That, my friend, is the key to Level II quotes. "These quotes show the depth of the market," explains Brent Blackaby, program manager for Power E*Trade.

Here's how. For starters, by seeing the number of bids and asks that are currently outstanding on a particular stock, you get a sense of the overall demand. Or lack of demand. That's because each ECN or market maker has listed its best bid or ask price. In this case, there are outstanding bids for 7,000 shares and outstanding asks for 6,400 shares. (This information is listed above the yellow bar.) More folks trying to buy than sell is a positive sign. And as the ratio between the number of shares looking to be sold or bought increases or shrinks, traders can measure the strength of the market on that particular stock.

Here's Where You Find Them
By now most of you have probably figured out that this is one service you don't need. (So save yourself $50 bucks per month and treat the kids to a night at Chuck E. Cheese.) But for all you aspiring day-traders out there, here's the lowdown on the best places to get Level II quotes.