Discussion in 'Trading' started by luke24.5, Feb 12, 2002.
Can anyone recommend a book/tape etc. that teaches the ins/outs of tape reading?
my favorite is Tape Reading and Market Tactics
by Humphrey B. Neill
Old classic, written in 30s.
I'm looking for a book myself with in-depth information about Tape Reading (Time & Sales Analysis) in today's markets.
If I find one...I'll post it here.
In my own trading...the simple rule has worked well...not always...but consistent.
First, know your financial instrument well. Watch the T&S closely.
Even better...get a software that allows you to do a "screen record". You'll need a large hard-drive.
I once had the T&S action of the QQQ for 6 months last year...mega data...will do it again soon.
Simple rule...if transactions are popping off at the bid...that "usually" means people are selling and the price is likely to fall.
If transactions are popping off at the ask...that "usually" indicates increasing demand for the stock...which means the price will rise.
Not a perfect simple rule...but it works well.
Who ever your realtime data providor is or will be...make sure they don't have "stalls" in their T&S during heavy trading periods.
Thus, knowing and "getting a feel" for the speed of transactions across your screen is critical.
Once again...highly recommend...buy a good software that will allow you to "screen record" anything on your screen and save it as a file.
This is an extremely helpful method when analyzing your past T&S data that's correlated with your price chart movements...
I probably need to add that tape reading described in the book mentioned and applied by me is not pure T&S reading, and there is much more to this method of reading than simple "trade at the bid or at the offer".
Luke 24 ;Have you read ''Reading the Specialist,DeeMan,rtharp''? Click ''search button top right corner,elite trader,com....................Wise well done, helpful.
Another book on tape reading is "Studies in Tape Reading" by Rollo Tape, pen name for Richard Wyckoff, copyright 1910, still valid. A study in psychology rather than mechanics.
Tape reading is my only style, I have been doing it for 4 years. When I first got started I searched and searched for books on the subject and I could find any, I finally wrote my own, the basic concepts are few,
- find one or two stocks that move with the S&P, the stock should correlate with the S&P greatly
- since the your stock is correlated, if the Spu's go up and your's does not, then you know something, either, there are no buyers or there are sellers present, the next time the Spu's roll over you smack the bid.
- Look for large Numbers on the bid and ask and learn when to believe them.
- if you watch one or two stock for a while you will learn how the specialist trades and what type of orders he has.
As far as books go, I doubt you will find too many on this exact method.
Best of luck
Can some tape reader tell me how read tape, and whitch slow stocks on NYSE are good candidates? I think it has some principle.
Don't let the date discourage you from reading itâ¹it is just as timely today as it was nearly 100 years ago:
"....What is Tape Reading?
This question may be answered by first deciding what it is not.
Tape Reading is not merely looking at the tape to ascertain how prices are running.
It is not reading the news and then buying or selling "if the stock acts right."
It is not trading on tips, opinions, or information.
It is not buying "because they are going up," or selling "because they look weak."
It is not trading on chart indications or by other mechanical methods.
It is not "buying on dips and selling on bulges."
Nor is it any of the hundred other foolish things practiced by the millions of people without method, forethought or calculation.
Tape Reading seems to us: The science of determining from the tape the immediate trend of prices.
It is a method of forecasting, from what appears on the tape now, what is likely to appear in the future.
Tape Reading is rapid-fire horse sense. Its object is to determine whether stocks are being accumulated or distributed, marked up or down, or whether they are neglected by the large interests. The Tape Reader aims to make deductions from each
succeeding transactionâ¹every shift of the market kaleidoscope to grasp a new situation, force it, lightning-like, through the weighing machine of the brain, and to reach a decision which can be acted with coolness and precision.
It is gauging the momentary supply and demand in particular stocks and in the whole market, comparing the forces behind each and their relationship, each to the other and to all.
The Tape Reader is like the manager of a department store; into his office are poured hundreds of reports of sales made by the various departments. He notes the general trend of businessâ¹whether demand is heavy or light throughout the storeâ¹but lends special attention to the lines in which demand is abnormally strong or weak. When he finds difficulty in keeping his shelves full in a certain department, he instructs his buyers, and they increase their buying orders; when certain goods do not move he knows there is little demand (market) for them; therefore, he lowers his prices as an inducement to possible purchases.
A floor trader who stands in one crowd all day is like the buyer for one departmentâ¹he sees more quickly than anyone else the demand for that class of goods, but has no way of comparing it to that prevailing in other parts of the store.
He may be trading on the long side of Union Pacific, which has a strong upward trend, when suddenly a break in another stock will demoralize the market in Union Pacific, and he will be forced to compete with others who have stocks to sell.
The Tape Reader, on the other hand, from his perch at the ticker, enjoys a birdÂ¹s eye view of the whole field. When serious weakness develops in any quarter, he is quick to note, weigh and act.
Another advantage in favor of the Tape Reader: The tape tells the news minutes, hours and days before the news tickers, or newspapers, and before it can become gossip. Everything, from a foreign war to the passing of a dividend; from a Supreme Court decision to the ravages of the boll-weevil is reflected primarily
upon the tape.
The insider who knows a dividend is to be jumped from 6 percent to 10 percent shows his hand on the tape when he starts to accumulate the stock, and the investor with 100 shares to sell makes his fractional impress upon the market price.
The market is like a slowly revolving wheel: Whether the wheel will continue to revolve in the same direction, stand still or reverse depends entirely upon the forces which come in contact with its hub and tread. Even when the contact is broken, and nothing remains to affect its course, the wheel retains a certain impulse from the most recent dominating force, and revolves until it comes to a standstill or is subjected to other influences.
The element of manipulation need not discourage any one. Manipulators are giant traders, wearing seven-leagued boots. The trained ear can detect the steady "clump, clump," as they progress, and the footprints are recognized in the fluctuations and the quantities of stock appearing on the tape. Little fellows are at liberty to tiptoe wherever the footprints lead, but they must be careful that the giants do not turn quickly.
The Tape Reader has many advantages over the long swing operator. He never ventures far from the shore; that is, he plays with a close stop, never laying
himself open to a large loss. Accidents or catastrophes cannot seriously injure him because he can reverse his position in an instant, and follow the newly-formed stream from source to mouth. As his position on either the long or short side is confirmed and emphasized, he increases his line, thus following up the advantage
This is the objective of the Tape Readerâ¹to make an average profit. In a monthÂ¹s operations he may make $4,000 and lose $3,000â¹a net profit of $1,000 to show for his work. If he can keep this average up, trading in 100-share lots, throughout a year, he has only to increase his unit to 200, 300, and 500 shares or more, and the results will be tremendous.
The amount of capital or the size of the order is of secondary importance to this question: Can you trade in and out of all kinds of markets and show an average profit over losses, commissions, etc.? If so, you are proficient in the art. If you can trade with only a small average loss per day, or come out even, you are rapidly getting there.
A Tape Reader abhors information and follows a definite and thoroughly tested plan, which, after months and years of practice, becomes second nature to him. His mind forms habits which operate automatically in guiding his market ventures.
Long practice will make the Tape Reader just as proficient in forecasting stock market events, but his intuition will be reinforced by logic, reason, and analysis.
Here we find the characteristics which distinguish the Tape Reader from the Scalper. The latter is essentially one who tries to grab a point or two profit "without rhyme or reason"â¹he donÂ¹t care how, so long as he gets it.
A Scalper will trade on a tip, a look, a guess, a hearsay, on what he thinks or what a friend of a friend of MorganÂ¹s says.
The Tape Reader evolves himself into an automaton which takes note of a situation, weighs it, decides upon a course and gives an order. There is no quickening of the pulse, no nerves, no hopes or fears. The result produces neither.
He must study the various swings and know where the market and the various stocks stand: must recognize the inherent weakness or strength in prices; understand the basis or logic of movements. He should recognize the turning points of themarket; see in his mindÂ¹s eye what is happening on the floor.
He must have the nerve to stand a series of losses: persistence to keep him at the work during adverse periods; self-control to avoid overtrading; a phlegmatic disposition to ballast and balance him at all times.
For perfect concentration as a protection from the tips, gossip and other influences which abound in a brokerÂ¹s office, he should, if possible, seclude himself. A small room with a ticker, a desk and private telephone connection with his brokerÂ¹s office are all the facilities required. The work requires such delicate balance of the faculties that the slightest influence either way may throw the result against the trader. He may say: "Nothing influences me," but unconsciously it does affect his judgment to know that another man is bearish at a point when he thinks stocks should be bought. The mere thought, "He may be right," has a deterrent influence upon him; he hesitates; the opportunity is lost. No matter how the market goes from that point, he has missed a cog and his mental machinery is thrown out of gearÅ
Having thus described our ideal Tape Reader in a general way, let us inquire into some of the requisite qualifications.
First, he must be absolutely self-reliant. A dependent person, whose judgment hangs upon that of others, will find himself swayed by a thousand outside influences. At critical points his judgment will be useless. He must be able to say: "The facts are these; the resulting indications are these; therefore I will do thus and so."
Next, he must be familiar with the technicalities of the market, so that every little incident affecting prices will be given due weight. He should know the history, earnings and financial condition of the companies in whose stock he is trading; the ways of the manipulators; the different kinds of markets; be able to measure the effect of news and rumors; know when and in what stocks it is best to trade; measure the forces behind them; know when to cut a loss and take a profit. Silence, therefore, is a much-needed lubricant to the Tape Readers mind.
The advisability of having even a news ticker in the room is a subject for discussion. The tape tells the present and future of the market. On the other hand,the news ticker records what has happened. It announces the cause for the effect which has already been more or less felt in the market.
Money is made in Tape Reading by anticipating what is comingâ¹not by waiting till it happens and going with the crowd.
The effect of news is an entirely different proposition. Considerable light is thrown on the technical strength or weakness of the market and special stocks by their action in the face of important news. For the moment it seems to us that a news ticker might be admitted to the sanctum, provided its whispering are given only the weight to which they are entitled.
To evolve a practical methodâ¹one which any trader may use in his daily operations and which those with varying proficiency in the art of Tape Reading will find of value of assistanceâ¹such is the task we have set before us in this series. ..."
great quote. funny how after all this technology is out here, and believe me I do love it, I was recently asked if a computer can trade like a human. how can you possibly code a program to trade off the tape like a true trader. there is so much a human can do, and so much that can be learned from traders from 100 years ago.
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