An in depth discussion on Tape Reading with the L2 and T&S

Discussion in 'Trading' started by The GOAT Trader, Apr 21, 2013.

  1. Good morning,

    I'd like to have an in depth discussion on tape reading via the Level 2 and Time&Sales. In particular I'm interested in how people spot institutional buying and selling on them. Let me start by contributing some of the ways I look for buyers and sellers. I trade stocks with thicker books and 1 penny spreads. Think stocks like BAC.

    The main thing I look for is buyers holding the bid and sellers holding the offer. For example if all of the exchanges on the bid of the Level 2 are taken out and the bidder refreshes that is a held bid. I want to see this happen at least twice. It can go through the level, but I expect the buyer to instantly re-offer, flash flipping back to the previous level 2. I will use the price .01 below this refreshing bid as my out.

    Another thing I'll look for is a refreshing ECN. This is similar to a held bid, except the buyer isn't using all of the ECNs. He may just be using EDGA or BATS or NYSE, etc. I look for a pattern where for example, there might be 5000 shares on EDGA, it gets taken out, refreshes another 5000 shares on EDGA, and does this for several minutes. I will use the bid's price as my out and punch out if it looks like he's going through.

    I am very interested in what some of the other traders on here look for when they are reading the T&S and Level 2.

    Sorry if this is not the correct forum as I did not feel tape reading fell into the other categories.