How to read the tape

Discussion in 'Trading' started by cashmoney69, Jul 27, 2006.

  1. People on this board say over and over again, if you can read the tap, you are a skilled trader, but I have not yet seen a post where someone tells HOW to do this. I dont get a t&s screen with my platform so i only know what a t&s screen looks like from pictures.

    How does a trader read the tape?.. what are you looking for?

    Is reading the t&s easy? or is there a "6th sense" involved?.
     
  2. reading time and sales is what you want to learn.

    Level 2 can't be read, because market makers post fake shares on the bid and ask, then pull or cancel their order the last minute to make it look like the stock is in demand. But it isn't.
     
  3. what are you talking about? many daytraders trade by reading the tape, nasdaq stocks especially since they move so quickly (programs). You just have to exit positions as soon as they go against you. that way, you only have to be right a frction of the time to be profitable.

    other guy, reading tape isnt something i should explain to you. its something u have to be taught and learn on a demo account and then once u can be proftable consistently, you'll trade money, etc... its about watching the bids, offers, watching the futures and watching charts. that and a whole lot of preparation beforehand, like looking at charts for major price levels, news, short interest to find the best stocks in play, etc... thats just one approach of course.
     
  4. mc312

    mc312

    I've been wondering about this too for a while. A couple of the things that I've heard said about what tape reading is supposed to be:

    1) It's looking to spot the tracks of the smart money, the big players that move a stock.

    2) It's not just looking at the T & S for a particular stock, it's looking at the T & S for a group of related stocks and figuring out what's going to happen by looking at how they move in accordance with each other.

    As far as (1) goes, I'm not sure exactly how one is supposed to detect the tracks of the smart money. One idea I've come across is that you can tell what the smart money is doing by looking at the the volume. For example, when insiders want to accumulate a stock, they do so quietly, so that others don't catch on to what they're doing. So the volume in this situation is relatively steady without any big spikes, and price rises steadily. After the public has seen the stock rise for a while, they start buying it, volume increases, and eventually there is a huge price spike along with a volume spike and at this point the insiders have dumped their shares.

    The idea expressed in (2) is basically that stocks in a particular sector tend to rise and fall together, regardless of the actual worth of the individual companies. I think that the key notion though is that some stocks are leaders in a sector and that the other stocks tend to follow them. I came across this in Richard Wyckoff's book The Day Trader's Bible. I haven't finished it yet so I couldn't give you much more information on it. There is a Web site where you can download a PDF version of the book for free:

    www.thedaytradersbible.com
     
  5. I've noticed a few things on T&S to indicate fairly dramatic moves that are about to happen. I still can't use T&S or Level 2 very often, because the stocks just move far too fast that I trade, but I try to implement it in my trading when I can, I am still just a pure chartist though.
     
  6. 1930's style tape reading sems to have been as much about knowing which pools controlled which stocks and therefore noticing when they started to get busy as it was about trying to read supply and demand.
     
  7. Lucrum

    Lucrum

    You might find this interesting.

    http://www.tradingfives.com/wyckoff/chapter1.htm
     
  8. That's a good start, the department store manager is a good example actually it was the same one (well almost) that was told to me. Reading the tape is an art, and its not hard it just requires hard work.
     
  9. There are many threads about tape reading and hints about what to look for. Just search user name Maverick74 and tape reading.


     
  10. #10     Jul 27, 2006