Comments on: Reading the Tape

By: John

John — Sat, 25 Jul 2009 16:44:24 +0000

Tom- May i ask? What do you use to read the tape? Is there a specific platform you use or is it the level 2 screen?

By: Tom Tarr

Tom Tarr — Fri, 24 Jul 2009 20:29:23 +0000

it is necessary to read the tape e.g. I traded SOL today and it looked like it was going to breakout at 6.19 which it had tested previously and was the early morning high. I read the tape and their was size on the offer at .19, was it real or fake I don’t know and I don’t care but what I DID NOTICE was that the prints were lethargic at that level. When it did break .19 it went .05 cents and there was size on the offer again at .25 (same seller? maybe). It tried to rally beyond that .24 level twice after coming back down and testing .19. Noticing that it wasn’t getting the speed in the tape or that offers were lifting, I got out at breakeven. I also did not see large volume come into the breakout to really push it higher. It also had been up for 3 days. Market was neutral after a big run of 12 up days. You really need to read the tape at important inflection points on a chart because the reverse engineering algo is to break a level to suck in longs/shorts and then reverse it i.e. bull/bear traps. The reverse is that charts can help tape reading i.e. LMT today was offering heavy at 74 looking like a good short but if you draw a horizontal line across a daily chart from the mid Dec. lows you see a support level the could be the right shoulder of a reverse head & shoulders. LMT is below 74.20 which is the exact lows and it closed below that area. It will be an important level on Monday. Anyway I digress, tape reading is essential.

By: invNin

invNin — Thu, 23 Jul 2009 12:02:28 +0000

reading the tape is kind of tricky because of the lack of good material to study. Without knowing what to look for we end up just looking for dancing number on the screen.

Also, even in your blog I sometimes get confused about what is reading the tape and what is watching the order flow…

By: OC

OC — Thu, 23 Jul 2009 11:16:57 +0000

This is a great blog, I am so sorry I had to discover it so late.
Reading the tape si also tricky, because if you use the market depth, nyse openbook you can be fooled. Let’s say that some big guys are terrible bored on their trading desks and say: ‘let’s plays with some sizez in the openbook’ – ‘what an excellent ideea!’.
And here is the tough one: how can you separate the real orders from the fake ones, or how do you manage to get out quick when you have a long position with a lot of sizez in the bid shown in the openbook, and then boom! all of the sudden the sizez are on the short side and your stock is crashing?

By: Chad

Chad — Thu, 23 Jul 2009 02:09:39 +0000

Could you explain what you mean when you say “read the tape”? Watching price action? Could you give me an example of something you would watch for? I watch price action a lot and I’ve learned some things from watching but I’m not sure if that’s what you mean (not familiar with the lingo). Thanks.

By: Gangineni Dhananjhay

Gangineni Dhananjhay — Thu, 23 Jul 2009 02:07:20 +0000

Tape reading by necessity still exists in Indian Brokerage trading rooms where number of Day Traders are bunched up at one Screen.I normally use order depth, Volume, VWAP, Open Price, Action at PDH, PDL as some proxies for Tape reading.How to identify significant levels or inflection points without the use of software like Market Delta or Market Profile.Is it possible to profitably trade with confidence without any charting or Market screening software as I am forced to trade in Brokerages

By: John

John — Wed, 22 Jul 2009 23:15:42 +0000

This is probably an amateur question, but what do you look at to watch the order flow? A level 2 screen?

Thanks