Can anyone help me understand the motive, the situation of these common tape reading setups? 1. Show bid- prints the middle-never hits the bid- prints the offer -and offer become bid .......GO LONG (fill an institutional order?) 2. Show offer- prints the middle- never prints the offer- prints the bid- and bid becomes the offer.......GO SHORT (does that mean it is close to getting to the end of an institutional buyer, and a reversal is going to take place?) 3. prints the bid again and again but does not go away- prints the offer and offer becomes bid...GO LONG (is this filling a sell order, and after the order has been filled, it prints, and a reversal takes place? ) 4. stock shows a very large offer and a very small bid. Eventhough the bid it hit, the bid does not go away. The offer starts to print and then the offer becomes bid....GO LONG 5. stock shows a very large bid and a very small offer. Even though the bid is hit, the offer starts with the same small size. The bid starts to print and becomes the offer...GO SHORT.
Call me crazy, I've only used the tape to scalp futures, but all these situations seem like they would be useless to analyze. You'd drive yourself crazy trying to make inferences from those near random situations.
I will try to explain the story behind each of the senarios. 1. Show bid- prints the middle-never hits the bid- prints the offer -and offer become bid .......GO LONG -This is a buyer that is keep stepping up. He is absorbing a lot of stock and will probably be ahead of the ECNs most, if not all the time. A bid is shown, but it is never hit, if it does, it will go off at a much more larger size than what the bid is shown. An offer is printed and the price of the offer then becomes the bid. Usually, offer prices are a cent, or a few cents higher than bid, and if the offer becomes bid, that means the bid raised in price (stepped up), and the buyer is ready to absorb more stock. This is a highly bullish situation as if you see this happening, there is an institutional buyer that would likely be stepping up a lot to get the stock needed. 2. Show offer- prints the middle- never prints the offer- prints the bid- and bid becomes the offer.......GO SHORT -This is the exact same thing as above except this is an institutional seller trying to sell the stock. The seller repeatedly steps down (prices go down) in order to sell his shares that has to go. 3. prints the bid again and again but does not go away- prints the offer and offer becomes bid...GO LONG -This happpens when there is a buyer and a seller at the same time and eventually the seller was the first one to finish leaving the buyer still in the process of getting shares. The buyer needs to buy the stock, and the seller needs to sell, the bid is hit repeatedly by the seller and after the seller is done, the buyer still needs more stock, and therefore he is stepping up (offer becomes bid) 4. stock shows a very large offer and a very small bid. Eventhough the bid it hit, the bid does not go away. The offer starts to print and then the offer becomes bid....GO LONG -this is a situation where a small bid from the buyer is matched up against a large size from the offer. The buyer needs TONS of stock and when the seller hit the bid (actively sold to the bid), the buyer took all of the size from the seller. ( this can be done by printing offers or the offer can be taken out in one print). After he took all of the size from the seller, it is still not enough and he steps up to get more stock. 5. stock shows a very large bid and a very small offer. Even though the bid is hit, the offer starts with the same small size. The bid starts to print and becomes the offer...GO SHORT. -same thing as above expect this is a seller whereas the above is a buyer. Steve, marv, please feel free to add/correct my explanations.
these situations are not random, although they may not largely have an impact on scalping as one is only in it for a few cents (hopefully more! ) but they are the foundation to longer movements/trends on a daily/weekly basis as buy/sell orders from institutions may take days to complete.