How to Make an Easy, Quick, and Highly Profitable Stock Trade by Reading the Tape

In this video, learn how to make an easy, quick, and highly profitable stock trade by Reading the Tape. See how a junior trader uses his tape reading skills to spot, execute, and profit on a quick trade in a hot stock.

View Video Transcript
in this video learn how to make an easy
quick and highly profitable stock trade
by reading the tape hi I’m Mike
bellafiore co-founder of SMB capital and
we’re a proprietary trading firm located
in midtown Manhattan and I’m also the
author of the trading classic one good
trade and the playbook
click our subscribe button so you don’t
miss any of the videos they’re producing
for you in the trading community see how
what do new trader uses his tape reading
skills to spot execute and profit on the
quick trade and a hot stock let’s get to
work
i’ma show you guys tape just a lil bit
of context here the tape that I’m
showing you is the open for American
Airlines and it’s capping up on this day
sixteen percent as you can see up here
in the top left the idea was to see if
we could get a failure back into the
pre-market range because we had a really
big push up in the pre market that
seemed pretty obviously extended and and
so we were looking for a potential
morning drive to the downside ideally so
I’ll go ahead and push up the tape here
so you can see here al pushes into the
79 large offer here and as you guys can
see if I scroll down to my montage at
the bottom of it there’s a 257 guy and
there’s some more size that we’re gonna
see here in a sec pop up so you guys can
see he’s sitting here at 89 and 88 on
NASDAQ obviously is pretty big so you
know we just made a bit of a move up as
soon as it opens started now we’re
starting to get hammered back down a
good place to be shorting against this
guy you can now see a little bit of a
bid here at a – as soon as 82 decrements
it’s going to be a good spot to be to be
getting short that shows that the bid
can’t hold so again you can see here
this guy that was selling 88 that we had
mentioned in the beginning now selling
84 now watch this guy and he said 80
he’s stepping down
you can see so we have some bits down at
60 here’s something a little bit of
support down they’re going to be putting
out some if you got that shored up there
you can see again he’s still sitting
here at 1680 so I mean you should be
offering out in front of 79 now can you
just stop the tape for a second so let’s
talk about stock selection what gets you
to be looking at this stock on this
particular day at this particular time
yeah that’s a good question so you know
generally if you’re looking for a tape
trade in the morning you want to see
momentum you want to see break of offers
break a bit so how can we find that we
generally can find momentum stocks that
are having large gaps
you know because generally they they
want to fill the gap one direction or
another people are going to readjust the
positions and so we can spot where some
guys are are trying to get in or trying
to get out of the name and especially
its key here it’s it’s gapping up a lot
and it’s going into SSR so that to us is
a key factor in this in this stock
selection because we like us to star we
want to see somebody is stuck you know
in their position then what they need to
get out and and of course al is an in
play momentum name our balls 25 at the
open I mean so when you say ask the star
what do you mean by that well it
basically means you can only short on an
uptick meaning you can’t be selling on a
downtick so that puts people in a
situation where as soon as the stock
starts going down you start seeing a
little more panic you’re gonna see all
four stacks we’re gonna want to get out
they can only sell in the offered so it
puts them in a tough situation for the
exit okay and in terms of when you’re
preparing for this on your charts what
do you think about where this is on our
daily charts or medium-term charts that
gets you interested in this stock yeah
that’s a good question so um you know
again with a 16 percent up move
obviously I’m not showing you guys the
chart here you can imagine that there’s
a big gap in the chart and that’s
exactly what’s happening in this
situation is we had a parabolic move on
al because there was it’s coming off low
as shorts were getting squeezed
and as soon as we had the parabolic move
to the upside we started seeing some
selling pressure obviously and so we
would gap down a lot and then we would
start gapping up a lot I mean there was
a lot of movement in the name so the
daily and you know as a good way to put
it it has a wide range right now if you
want to learn three real-world setups
that our traders use including the
simple setup that we teach all of our
new traders and the setup that turned
one of our traders into a seven-figure
big money earner check out the free
webinar that we’re currently running
just go ahead and click the link that
should be appearing right now at the top
right hand corner of your screen that’s
gonna open up this free registration
page in the new window so don’t worry
you’re not gonna lose this video you’re
gonna learn more in a couple of hours
from this trading workshop then from
years of online education and so now
we’re gonna look at the tape because
we’ve selected a good stock to trade and
we’re gonna practice our scalping our
momentum trading we pushed up we opened
at 82 1682 so we made it move up off the
open like we should all we saw him to
take there and our gold back below the
opening print so we’re back below the
opening print we’re watching some offer
stack we had him at 80 now we’re seeing
him at 72 we install him at 84 so we’re
gonna follow this guy and look now he’s
snacking even more or 72 this is key
right here now we’re seeing some you
know some real selling pressure here now
people are front-running 72
again now he’s setting out in 67 he’s
trying to get out
and then if I can cut in what’s the
significant to you of this being below
the opening print well when you have a
stock gapping up a lot obviously we want
to use some important inflection points
but when you have a wide range on the
daily a good way to determine if a stock
is strong or weak especially on a gap up
is to determine whether the stock is
open is above or below the opening print
because that just generally shows you
whether the buyer’s or seller’s are in
control since the open obviously you can
use V WAP but I mean this it’s a good
metric when things are moving fast and
view up hasn’t really been established
yet okay great thank you back to the
tape so 59 stacking 58 stacking he’s
stepping down and 57 now stepping on 56
55 and you can see him he’s stacking the
whole way he’s trying to get out
so you can see here now there’s a guy
stacking in 42 but let’s let’s watch now
the low is 40 I have it here on my on my
level 1 it shows me the low so as the
little gets pierced let’s kind of see
how the tape is starting to react it
speeds up we start seeing somehow bits
and what I mean by that is that we what
we’re starting to see is is bids staying
there for more time than we’re expecting
for the amount of allign we’re doing
generally that tells us there’s probably
hit in order there or something that’s
kind of you know holding up that price
so again we’re pushing new lows here
with 1625 1625 is holding we start
seeing these offers at 27 remember we’re
looking for an exit signal at this point
now we’re you know at 16 20 25 and we
opened up you know at 16 82 so we’re
pretty excited from the high we’re
pretty excited from the open for such a
quick move what we want to see here down
as this stock gets lower is we want to
see for a potential larger large bid to
start holding us or a help bid to start
holding us up and then for confirmation
of that of that bid we want to see an
offer above that he’ll bid that gets
cracked and breaks to the upside that
tells us that those sellers can hold it
down anymore
so again we’re still seeing that seller
there on that Jax he’s so hundred and
thirty now
so you can see now all those offers
they’re completely bold they’ll be put
in the low there of 1650 and I can see
on my level one there we see 16 15 is
the low and now we’re 10 cents off the
low we just saw some massive offers get
completely sweep tout now I’m I want to
be out of my momentum my months unsure
at this point you can see this is then
the move they’re actually and that ends
up being the low for for quite some time
okay good couple of points about this
when you’re starting off as a trader a
couple of very easy strategies to learn
a scalping and momentum trading and
you’re gonna see people all over Twitter
tell you you can’t make a lot of money
scalping and momentum trading I would
just say if you want it we won’t
actually really do this but if you want
to see Swank’s P&L you’re welcome to
come over and actually take a look at it
again we’re not actually really gonna
show it to you my point is there are
people that make more than 5 million
dollars a year and a year like this who
are momentum trading and scalping don’t
let anyone tell you that that’s not a
way to make a lot of money but taking a
half a step back from that when you’re
thinking about developing as a trader
when you thinking about starting as a
trader you wanna think about the right
way to do it you want to think about
building skills so you can build a
career learning how to read the tape
learning how to scalp learning how to
momentum trade is a very valuable way to
they’re very valuable skills and it’s a
it’s an important way that you can learn
how to trade at the beginning it’s a
little bit easier to understand it’s a
little bit easier to explain very
worthwhile way to start going about
trading there gonna be some people who
after they scalp and then momentum trade
find but that’s not the best
type of trading for them and that’s fine
this is a journey this is a process you
shouldn’t think all you’re going to do
as a trader is learn one strategy and
that’s going to be make it or break it
for you as a trader you should be
prepared to develop some range and
experiment with different types of
trading but really good way to start
your career as a new and developing
trader a really good way to build skills
for any type of trader that you become
like so let’s say that you decide you
don’t want to be a scalper momentum
trader you want to be a swing trader
well you’re scalping your momentum
trading your tape reading skills will
help you to build really good swing
positions at better prices and exit at
better prices as well it’ll help you to
get bigger at spots it’ll help you to
cut risk even with your big picture
swing trades so shark is gonna make a
lot of bigger picture swing trades but
use his swing trade the use of scalping
his tape breeding his momentum trading
skills to put on his bigger picture
trades and make cash flow while he’s in
the middle of it and cut his risk while
he’s in the middle of it and so very
effective for swing traders as well I’d
also say that markets change there are
different market regimes when volatility
is elevated there are going to be a lot
of swing traders who sit around and
complain about the market and struggle
in the market because of the volatility
of course if you have really good
momentum trading skills when volatility
is really elevated you’ll clean up he’ll
do really well and even if you’re not
first the momentum trader and you’re
more of a swing trader when volatilities
spikes you may want to for a short
period of time
go back to your momentum trading even if
you’re a swing trader because the
opportunity is so large
for that and so you know good to have
these skills right now and you know we
just recently hit another pocket or
volatility spiked and you can see even
some of our swing traders do some more
momentum trading and so and then the
other thing is what I really like about
what Nano does here is this is a great
exercise to get better at your tape
reading skills which is you record your
screens and then you go back and you
watch for the significant moments that
caused stocks to make big moves in one
direction and then you find was
significant the tape and so you know you
might look at the tape for four hours in
one particular day and there only might
be 10 minutes that really caused you to
get super interested but in that 10
minutes you could really clean up you
can really make a lot of money if you’re
focused and and the other thing and
we’ll talk about this a little bit later
on one of the reviews is that I really
like for you guys as best as you can to
take the recorded video of reading the
tape like nano does here and embed that
into your PlayBook trades one thing to
have a playbook trade another thing to
have a playbook trade with also recorded
tape that we can watch of the trade of
reading the tape to put that into your
PlayBook
for certain types of trades and so if in
one of your playable trades the tape is
particularly significant to embed that
into your PlayBook trade makes that even
better so you know for the market imp
we’re in right now scalping momentum
trading is very opportunistic
particularly in the airlines the cruise
lines some of the hotel names now I
think you’re doing a lot of scalping and
momentum trading in those names right
now yeah that’s right I am
and I think a lot of other people are as
well and so look if volatility goes back
to 12 the VIX goes back to 12 we will
not put as much emphasis on momentum
trading and reading the table we may
make use it more for entry and for exit
and and not as much for what your what
you did here which is almost a signal
almost a catalyst for the trade almost
using the tape you know but you know you
did a good job of stock selection you
did a good job understanding where the
stock was in the overall daily chart but
then you know the catalyst is almost
becoming unusual information from the
level to from reading the tape that you
can follow and you did and it can make a
good nice little chop and move on to
your next particular trade so for the
younger guys record your screens do a
good job like nano does right here by
making videos like this so we can all
learn from and pass them around that’s
what we do these 12:30 sessions and and
build those skills there they’re super
super important to becoming a trader
it’s not gonna be the only thing that we
use to make trade decisions we’re not
gonna sit here and say we’re gonna build
the trading career by you noticing a
large offer you’re gonna build a trading
career by noticing a big bit what we are
gonna do is say when a stock is really
in play and when the market end or if
the markets pretty volatile there’s
gonna be money to be made by noticing
these Abner Abner a letís these this on
these unusual orders this unusual order
flow from reading the tape which you can
take advantage of and and you can make
money on and so I wrote about this and
one of the books I wrote which is that
when you do make a lot of money in plays
like this and you get paid and you take
your check to the bank
they’re not going to say to you we can’t
cash this check because you made it
reading the tape they’re gonna cash the
check this is a way that people really
can clean up as traders so we’ll spend
some more time developing these skills
spend some more time working on it a
good example right here from reading the
tape that we can learn from appreciate
your your video here nano yeah so animal
I’ll let you get back to training thank
you yeah okay hey go ahead and click our
subscribe button so you don’t miss any
of the videos they were producing for
you in the trading community and please
take the time to add your feedback in
the comment section for what videos
you’d like for us to produce next and
what you found helpful from this video
from all of us at SMB train and trade
well

* no relevant positions