I wanted to start a thread about tape reading. I am currently trying to learn the art of tape reading and I feel I am making some good progress. However, I have had little education and guidance in my quest to read the tape. I was hoping those who have more experience would be willing to share their knowledge. I have attended Don Bright's week long seminar about a 6 months ago. initially I didn't feel like I learned a whole lot, but then when I started trading on a daily basis I realized that I did in fact learn some rather useful things. I know though that there is a ton more one could learn on this subject and so I hope that this thread will gives us a place to share our ideas and insights about this obscure art. Currently I am only trading one stock on a daily basis, trying to become a "surrogate specialist" as Don would put it. As I watch the stock and attempt to read the tape I am looking for a few things. Number one is the stock strong or weak, and is it moving with the market or resisting it. This is often very telling, especially if the stock is resisting the market. Secondly, I am looking to see where the stock has support or resistance points at. Often they can be found at the even numbers like 34 & 35, as well as the half numbers. These are usually good places to buy or sell. The third thing I watch for is the trade through. The trade through will happen when the stock is very one sided and it seems that all anyone wants to do is buy it, or sell it. When this happens we know the specialist is required to accommodate the lopsided demand by buying or selling, however he can move the stock up or down and basically chose his price. Wanting to make money like us all he moves the stock to a point in which he knows it will reverse and go the other direction so he can cover his position at profit. I have found that these moves often corresponded to short term highs and lows and can be very profitable when identified. On the tape this move is rather easy to spot. First you see the stock running up or down rather quickly. Then when it seems that it will never stop you see the bid of the offer make a rather large move in the same direction as the stock had been moving and the size becomes 1. After you see this there will be a pause in the trades and it is pretty obvious that something is up. immediately I will send an order either at the inflated offer or deflated bid. Sometimes it works better to send the order a couple of cents to the inside that way if the print is slightly to inside you can still get filled. Next, you will hopefully see a large print and you will get your shares. What happens next can vary for situation to situation but the odds are that the stock will move in your favor for some distance. Sometimes it's not very far and you have to judge the strength of weakness just after you get filled. However, as I said before these can often be the day high or low. I have found this to work pretty well for selling but not as well for buying. These are a few of the things which seem to work pretty well for me. I would greatly appreciate anyone else who has something to add, or advice on the things they watch for when reading the tape. Yes I did do a search of the previous threads and didn't find them to be much help.
Schumacher is doing a breakout session on some tape reading tatics at the NY expo in a few weeks...probably geared toward nasdaq I bet. Might interest some. http://www.onlinetradingexpo.com/friday.htm 4:45pm - 6:15pm: Julliard Complex (5th Floor) "Revitalizing the Lost Art of Tape Reading" Speaker: Chris Schumacher, RealityTrader.com This session will take you into an in depth discussion into the principles of tape reading. We'll dig deeper into the trading process through understanding the root of tape reading principles, price and volume. He will take you beyond the industry's common misperception that tape reading is simply watching a Time/Sales and Level 2 screen. By understanding the foundation of tape reading principles he discusses, you will finally realize the true power of these principles to help you with your trading plan. If you've wondered how to distinguish institutional activity from retail or "Joe Public" activity or see accumulation and distribution in it's early phases, then you will not want to miss this powerful presentation complete with principles and examples.
I am surprised that no one has anything else to offer in the area of tape reading. This is such a huge and important part of daytrading I figured someone would have something to add. I guess it speaks to the usefulness of this message board.
This is difficult to address in posts, at least I find it so. Tape reading is very immediate. Therefore, I've learned the most when following the tape with somebody who knows what he's talking about. Going over it later requires so many words to describe what was going on at the time that it's easy to get lost in all the prose. RealityTrader.com has been mentioned, and, as far as I know, they're the only people with a site who are really into tape reading. And there's Humphrey Neil's book. There are articles, of course, but they're probably too general to do you any good. --Db
I was going to tell you some stuff about tape reading, but before I could, you insulted this board, so I guess I will wait until a more humble and patient student comes along to share what I know.