Reading the tape

Discussion in 'Technical Analysis' started by mjbmedia, Feb 2, 2011.

  1. FWIW... Trying to read the tape on the Q's isn't that great because of the volume. Plus you still need the prints to get the whole story. If you want to learn how to read the tape you need something with like 5M shares a day, something that is in play preferably and record your screen (level 2, and prints) and look for catalyst of a move.. And watch this over and over again...

    Example of what to look for at the beginning...

    If you see something like ARCA on the offer at 15.05 for 1 (100shs) but in the prints you see the offer being printed from ARCA for 20, 40, 5 (2,000, 4,000, 500) ect... then this is considered a held offer. ARCA is showing he only wants to sell 100shs, but the prints tell a different story showing he's selling a lot more then what he's showing.. There are a couple plays to be made off this basic tape reading setup. If you have identified a buyer buying it lower (again by using the tape someone stepping the stock higher and accumulating) and then you get a held offer at 15.05, maybe you wait and overlap and be willing to pay once ARCA lifts 15.05 because you now know whoever was selling 15.05 here is now gone or stepping higher.

    Or if he's selling and then he steps down to 15.03 ARCA and continues to show 1 but the prints show offer again considerably more then 1, you could short with him, because he obviously has a lot to sell and is being aggressive by stepping down.

    that is a basic example of what trading the tape is like. I have found that these types of plays work best on the open because after the open the algo's kick in and make the tape a little harder. This is the time where you want to look for patterns, like accumulation patterns ect.. but again a little more advanced. On the open I purely use the box to trade and rarely look at the charts. After the open I will look at the charts and then use the tape as my confirmation or a spot to start my position.

    The best thing you can do is record your screen. Play it back and just look at the prints first, then add the bids and offers.. then try to find reasons according to the tape something would have a catalyst to move higher.

    Reading the tape, in my opinion is a great and invaluable skill to have, it just takes time (think 6months-1year) of fulltime trading plus watch the tapes over and over again.

    good luck
     
    #21     Feb 8, 2011
  2. wrbtrader

    wrbtrader

    I don't understand...why not show it for futures considering that's what the OP is interested in. :confused:

    By the way, thanks for the images and explanations...hopefully it answers some of the OP's questions.

    Mark
     
    #22     Feb 8, 2011
  3. mjbmedia

    mjbmedia

    thanks for the examples , they help , I will seek access to that level 2 with my brokers to see if it helps me
     
    #23     Feb 8, 2011
  4. Until recently, I worked for a company which built a trading platform which excelled at Level II based trading. Think of automatically tracking all of the market makers for a large number of markets for patterns similar to what KingDong130 described. It alerts the investor to these developing opportunities rather than automatically placing trades. You need not just the indicators based on patterns, but also a huge amount of Level II data. Much more than is available on any retail platform.

    The design of the product came from long established professional traders. When we got it all working and started marketing, the investor realized that he couldn't safely fund the ramp-up phase of the company and is looking for a partner.

    I used an equity in my images; because, we started with equities to keep our overhead down while developing the product so those are the recordings that I have. It can replay Level 1 and 2 data with different indicators/settings/configurations until practice makes perfect. The program finds real opportunities.
     
    #24     Feb 9, 2011