Do I Need to Learn to Read the Tape?

Feb 11th, 2013 | By | Category: General Comments
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SMB Reader:

Dear Mike,

I wanted to reach out to let U know how much of a better trader I’m becoming thanks to U guys. It feels really good to notice daily improvements in my trading. I paper traded for 2 years and half before starting with real money 3 months ago.

I’m a french award winning multi-platinum musician/composer/producer who’s been living in Los Angeles for the past 4 years. My daily routine is to trade stocks in the morning and compose music in the afternoon, I love this balance. Music business became quite boring and slow, I m very hungry to learn and improve everyday which I think is one of the reasons why I became passionated by trading. I studied trading with different people but nobody gave me a such quality education as U guys. I’m spying on everything SMB do, Spencer’s videos reviews are probably what I enjoy the most.

As U can see on the 1st picture attached ( my layout ) I developped a scan trying to match your SMB Radar 🙂 that I keep improving days after days ( color coded by volume ratio as U guys do ). Of course I’m convinced that U have specific algos that make your Radar way more efficient than mine but I keep working on it, Trade Ideas people are sometimes nice enough to give me some custom indicators to add to my columns :-). I also have a specific Trading Ideas layout for monitoring pre market and another one for post market. ( Right now my challenge is to try to find what indicators U guys are using for strength in your strong and weak columns, I ve been experiencing by using an ADX and DI and sorting the results by ADX/strength so far )

One of the things that helps me big time is of course to keep screenshots of my trades and also to keep them organized by type of patterns in my Iphoto gallery ( picture attached as well )

I basically just wanted to show U what I ve been working on since U guys are quite an inspiration !

My question: as U can see below I only use book trader and no real Level 2 so far. Would U really push me to use a real Level 2 window instead to read better what s going on ? ( I also know that TOS is lagging a tiny bit so I m definitely planning on moving to Lightspeed asap. )

Thank U very much for everything U guys do !

Bella

We make trading decisions based on 5 indicators, we say “checks”:

1) The Big Picture

2) Technical Analysis

3) Intraday Fundamentals

4) Reading the Tape

5) Intuition

In my next book, The PlayBook, which you can preorder here, I discuss in detail how we use each indicator.  When we archive a setup for our Playbook we also incorporate:

a) Trade Management

b) Trade Strategy

c) Trade Review

Reading the Tape is a skill that our traders use to make trading decisions.  It helps us:

a) Find set ups that you cannot see on your charts

b) Spot catalysts for the next move in a stock

c) Enter and Exit our positions at the best prices

d) Add Size when we see a catalyst while controlling our risk

e) Scalp and miscroscalp when appropriate

f) Momentum trade

So in short Reading the Tape is a valuable indicator for us.  There are successful traders who do not use the tape.  It’s up to you whether you want to learn how to use this skill to help your trading.

It seems you are learning a great deal from SMBU.  Would it kill you to take the SMB Foundation? 🙂  Seriously, at SMB we believe in the power of great coaching and mentoring for your trader P&L.

Mike Bellafiore

One Good Trade

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