Again... You need to watch the level 2 to make sense of it!! For every print on the tape there is a buyer and a seller at that price... It's just whether it takes place at the bid or the ask. However you need to watch the level 2 inconjunction for it to be of real use to you. Ie you will learn to recognize reserve orders, peg orders, crossing orders... As well as the importance of particular ECNs being printed
One of the challenges with Tape Reading in today's electronic markets is digesting the sheer volume of information in real-time. It is our opinion that Tape Reading in today's markets is best left to automated algorithms. We make a bunch of tape reading algorithms and publish their output in real-time so that you more readily tell whether the Buy or the Sell programs are dominant within Order Flow. We call the output of these algorithms, The WOW Index. You can check it out for free here.... The WOW Index - Free Real-Time Order Flow Monitoring Service There are a bunch of videos on the site that can help walk you through some of the logic around how changes in order flow precede changes in price and also a bunch of trading examples. Ping me if you have any questions on how to use. Hope this helps.
Usually associated with stock trading. You should use Google or any other search engine to find answers. http://www.investopedia.com/articles/trading/06/Level2Quotes.asp http://www.google.ca/#q=Level+2+Tra...&resnum=3&ved=0CDwQqwQwAg&fp=58b64dc0725c4ce4 Mark
Yeah...I knew you were only interested in "tape reading" via futures trading and not Level II via stock trading because of earlier posts by you about futures trading in other threads. Mark
Level II / Top of Book / Depth of Book data is not limited to stocks. If you want to understand the auction market, you can't pass-up the order book.
Steven.Davis, Please post an image example (instead of words) of such involving any particular futures market so the the OP clearly understands what you're talking about. Mark
I don't want to be accused of revealing anything confidential so all that I can say is the basics. I know that the graphics are for equities, but it is pretty much the same. Basics of a Level II display: Every vendor has a different display, but here are some basics one would expect: The Red squares show the National Best Ask Price. This is the lowest priced limit order in the book. The Green square shows the National Best Bid Price. This is the highest priced limit order in the book. (Since one has to pay extra for this Level 2 quote information, most people do not have the Level 2 quote information on every exchange. The national best bid/ask can be better than the displayed order book if the best price occurs in a market for which you are not subscribed to Level 2 quote information.) The limit orders at the best price are called the Inside Orders. The Brown square refers to the price of the last trade. At this point it was the same as the Ask Price. This usually means that there was a market order to buy so the trader got the best available sell order. There is much that can be said about reading the tape or understanding the auction market. Many people have written books on the subject. Several of which are visible on my shelves right now. Let's just take a couple of minutes of market activity for a typical example. Frame 1. Here the symbol QQQQ has come to my attention based on the imbalance in size available at the Inside (within the Insider Orders.) We see that there is 100,000 shares available to buy and only 10,000 shares available to sell. This is at a point on the chart where the stock is coming off of a recent low. Knowing that there are 100,000 shares available to buy, a person can reason that taking a long position is relatively safe. If you buy at the Asking Price of 53.66, and it goes against you, you loss will be limited to 53.65 until that 100,000 share composite order is filled. (Of course, it isn't really that simple. There are iceberg orders and fill-or-kill orders. Traders can fake-out the market by showing large size and then canceling the order. The question, however, is how do you read it in the first place.) I'm not saying that one should definitely buy on this frame, but that the order imbalance is bullish. Frame 2. The market has eaten the 100k share bid, and gone down further. Furthermore, now we have 165k bid vs 99k ask. The spread has widened. This looks like a turning-point. Frame 3. The market has rallied. Recent profits need to be taken off of the table. Buying interest has evaporated, and the sellers are strong with 136k to sell. We have a bearish imbalance. And so on, all day long. There have been many books and much software written. The other posters in this thread encouraged you to film specific market events which are confusing, and bring the footage online for interpretation.