Ive seen several times where people reccommend watching time and sales when entering a trade. I have tried this a number of different times because it seems so logical. If you see a steady stream of trades going off at the bid the markets going down, right? Wrong! Somebody is buying all that merchandise. Are all those buyers idiots? Hardly. I dont know how many times ive seen 100 on the offer and a 1000 on the bid and itll drop to the next level in an instant. Maybe Im missing something but I do not see any advantage to it. I should specify that I am referring to the futures market. If anybody is using time and sales as an indicator and feels like sharing I would appreciate their input on how to use it effectively.
First of all you have to understand the time and sales is not like any other indicator. An indicator gives you a value, a number which has a meaning (For example, a RSI value of 80 will tell you the market is overbought). No matter when, how long, how often you look at the RSI, it always gives you a number / result to work with. T/S is more like a constant develloping proces. You cannot look at the T/S and get a number / meaning. You have to follow the T/S for an instrument for some time to see the total picture. I agree with you that a single screenshot with a bid of 100 and an offer of 1000 doesn't tell you anything. But again, see above, you have to monitor T/S for some period. As for your statement that for every seller there's a buyer, that's correct but there's more to this. The very basic question to ask is : Why is this buyer only willing to pay the bid / is the seller willing to take the bid ? I suggest to read the basics of tap ereading if you would like some more info on this subject. I believe there's a new book about to be released that covers tapereading. It's written by ET members. Do a search. Hope this helps
you really need to see what is going on with your particular instrument that you trade. here are some things that i have realized while closely watching t&s.....you can't just watch the t&s by itself. you have to take it in context with everything else. t&s will always reveal what is going on though. why? because the prints don't lie. if you see 1000 on the bid and 100 at the offer, and shitloads of prints are going off at the offer, then, hmmmm, maybe that means somebody is dumping some stock? if a bunch of prints are going off and the offer isn't being raised, doesn't that tell you something? or better yet, if a bunch of prints go off at the offer and the bid is then dropped, doesn't that tell you something? ok, here's one. price breaks through support and is confirmed by t&s as prints start going off at the bid well past support. then, prices stop going off. the bid/ask gets raised. then again, then again. no prints. then again. a few prints. what does this mean? nothing. it means nothing. two things could happen at this point. you could see people covering and running for the door, or you will see that bid/ask start to fall back to where it was, and prints continuing. point is, you wait till you see people running for the door. your short is innocent until proven guilty. does this make sense? the t&s is but a real-time indicator as to what people's emotions are. used with other things such as s/r, lvl1,lvl2 it can paint a much better picture of what's going on. i for one, switched to 5 min charts, so the t&s is of much less importance to me than it was. on the 5 min, s/r rules. far fewer headgames going on, and an easier way to trade.
very good question easyrider ! maybe we can elaborate also on the use of market depth as an indicator; regs, paulus
i dont know about tape reading on the futures but i would also be listening ot a squawk to see whats going on in the pits. but i make mone tape reading t&s in stocks...
I also don't see any advantages to it on the futures. In 1999/2000 when many Naz stocks had daily ranges of $10-20 it made sense. But still, classic technical indicators had more or less the same value.
I don't use T&S for futures but I do use it for Stocks. I wtch about 20 lines of values and looks at about five aspects (in the order of importance for me personally): 1. Color 2 Speed of screen moving, or it is is stalled or jumpy 3. Size of blocks trading 4. Size of the side of the trade that is not trading. 5. The spread across the BB and BA. Since I have multiscreens, I can arrange stuff conveniently during the day. I move the T&S to be next to my fractal chart for the exits I am making. I don't use it for entries at all and I use it for every exit. I always print out the blocks as they sold as I exit. I label them by account and draw loopy lines from block to block for each account (I fill this in when I am told the sequence). It is like bleeding out with partial fills. I connect this stuff back to the chart later in order to consider if I did a good job feeding partial orders to my broker.* I work primarily from the quote sheet and the displayed daily volume which I compare to my previously determined key volumes for the stock. The daily prorata volume is what triggers my trades along side of the five items above. My emotions are tied to the T&S almost totally. What is at the top of the feelings I have is: how long I will have to continue to get done (I like it to be not long); whether I am getting the timming correct (this is tied mostly to starting too soon, having a smaller part of trade going across peak); and after the peak, tabbing how much each filll leaves on the table compared to better partial exit best fills. The T&S is my absolute major reference for my performance. someone said here that you have to get used to it to know what is valuable. I agree. My list of five probably sounds sophomoric. Because of my situation, others do want to know "what the heck were you thinking of?" I have brokers who coattail trade me. some times they hold personally 20,000 shares and then they have accounts as well. I know I am maintaining a limit of 10% trading level on volume, but I also know they are doing their thing too. It is important to them to know what the five things mean to me. This is an important topic for trading, exits especially. * I try to trade into the peak, on the peak, and not have any remaining fills to do after the peak. I am monitoring to not trade more than 10% of total so far in day and to not have an order with my broker that to is too large. If it is too large then the T&S gets "crowded up" with my stuff and causes me to not just fit into what is happening. Since I have a bunch of accounts that the stock is spread over, at any time that aspect keeps things smaller and settled down.