Why not just watch it live on demo/simulator? Forget all books, all those guys traded the slow ass NYSE. Back then, all trades were done with human speed by humans. Now that algorithms are fragmenting orders, it's not the same. Here and there you can catch a good indication of direction but when one 100 share refresher from a major MM is fighting vs another 100 share refresher from another MM, you might as well flip a coin, set a stop loss and look at some porn.
Tape reading is one of those trading skills that IMO is best learned through doing it. If you're looking for primers, the Wyckoff link looks interesting. Also, the "Price and Volume" threads on here by dbphoenix are definately worth a read. In the end, what tape reading comes down to is having a feeling for how the process of price discovery unfolds during the trading day. Unfortunately, every market is a little bit different in how it trades, and becoming a skilled tape reader often requires specilizing in one particular market IMO. My advice is that if you want to get good at it, get some windows set up. I usually have a market profile window, a 1 minute bar chart and the time and sales up. I'm told Market Delta is also quite useful, but I've never personally gotten good at using it. Observe how the market behaves at different prices and how many buyers and sellers come out. You'll start to notice that there are often levels that prices are attracted to. Also, during the process of price discovery, you'll see that the market will try and push prices in one direction or another. Tape reading helps you determine when the market has enough force to break through and when it does not. In time, you should start to develop a feel for the rhythm of the particular market you look at...getting a feel for that rhythm is what tape reading is all about. Good luck ! -T
And because it's an art, it's highly subjective. I don't think it makes too much sense to ask how. You will learn to read the tape by reading the tape.
I got a question, do people think that Level 2 is useful for extremely fast moving stocks (GOOG, AAPL, VLO, X, GS, SPY) and others like that? I have of course sat in front of my computer trying to understand level 2, but, it seems the best I can do, is when I can kinda "sense" that a big move is coming, is the Level 2 reacts in an erratic way and time & sales usually makes a large number of prints at a very fast pace. I also notice times when I see a huge amount of orders on the T&S come in and they will all be hitting the ask, maybe 10 - 30 orders in a row, all green on my T&S and I know it's a good indication that this thing is about to move. Most of the time, the price drops suddenly after that. Again, I am a chartist, but I assume that is because a lot of traders, or big boys just tried to buy up all the stock and move the price higher, but there was a big seller offering shares at that price and/or shorting it and then price shoots downward as aresult as few are left to buy and most decide to short, and vice-versa. Any opinions? This doesn't happen all the time of course, but when I see green or red flashing up on my T&S, I can usually tell that big moves are about to happen. Anyone else notice this, or is this just me being dumb at reading L2 and T&S, as I have never really looked into it on the internet or books or anything, i have only looked at it and tried to understand it. Just curious on if there are any traders that trade a few of those stocks that can offer opinions, as I just think Level 2 quotes move way too fast for me to make sense of them for the stocks I trade. I'm still learning though, I have been interested in reading and understanding the tape, but the chart is still the main tool I use, but I have really been trying to add Level 2 and T&S in my trading to locate solid entries and possible exits (even though most of my trades last less than a minute)