Step one Here is the premium panel that portrays the smart money moves. This is not found on retail or pro platforms. But is announced pre open each day at indexarb.com. You have to adjust for drift as day goes by snce that website does not have the capability. As you see several signals and changing contexts are showing. Just read it from left to right. The panel keeps shifting to the right as the future comes into the present. The things you watch are volatility compression followed by volatility expansion. This is centering in price then moving price to str or squ. You see the shifts from red to black (long) and the shifts from black to red (short). You see sustained holds as well. And you see premium drift. Real drift is reset to new premium BEFORE the BOTS and ALGOS do the reversion which kills volatility. All of what is called tape reading is much finer than bar analysis and what is now called PA. To do it well takes drills and usually mentoring for a week or so and after a person has the P, V relation down as an automatic fully mind differentiated automatic habit. a few people make a great deal of money and rarely are upside down. these people trade on a level that popping on the wrong side of the market for a moment is just slowing down profit taking and being far away from a draw down. Tape reading does not have draw downs at all.
The thick and thin on the bars means somthing visa vis volume. The panel's math isarchived in wealthlab and the Hershey script thread. pepe did some nice panels on the DOM and non stationary window values rates of change. None of this is used in the Cash Cow basic which is indicator and volume only based (price is not used in the code.)
Not much point in books about the tape...kind of like writing a book on how to trade in an open outcry market on order flow..it doesn't make much sense. The only thing you can really do is log a few hundred hours in front of the tape and you will start to see little patterns.
tape reading isnt totally dead is it? it just seems it is so much harder then before and less people actually even attempt it now
I think the specialist reading is almost dead now, but tape reading can be defined as a more spacious conception.
I have been trading for 15 years. Tape reading was very valuable when I started trading. Electronic markets and computer trading has changed that. Since I only trade a few stocks, I still monitor time and sales. It is a connection to the stock you are trading. A chart takes up 60 percent of the space that I allocate for a stock on my screen. Market depth and time and sales fill up the other 40 percent. I cannot say that I use the tape information to trade, but when a stock makes a move on a chart, the time and sales give you the specifics of the move.
To me, tape reading is looking at different sector indices of the economy. You can find divergences within these sectors where things are overbought or oversold. Then you drill down to single stocks within different sectors. You look at the relationship between the leaders and the laggards in the sector. You can get a pretty good idea of where things are heading for the week/month by doing this and finding the real pulse of the market. If you're a short term day trader, you can do this same exercise on shorter term charts. You start from the macro and drill down to specific stocks. If you watch throughout the week, you can see sector rotation and sometimes you can get ahead of the tape and be in on the next rotation.
tape reading is still very much alive in illiquid markets.......with liquid markets its not about watching every single transaction that takes place and watching every single bid/offer, size, etc.....its about reading the ebb and flow of the market. So yes still very possible (I know a lot of people are gonna flame me about this but I don't care)