Learning to Read the Tape
- Thread starter TTStocks
- Start date
Isn t tape reading a saying from the telegraph era, like those glass covered telegraph machines? I think that there were only a few left in use as late as 1970. Technical Analysis would replace it. You probably already knew that. The ticker tape machines provided symbol and price followed by volume info. I am into charting and macro..I enjoy fishing ,sunny days at the beach and try to date once a month...thank you thank you thank you
Nothing publically revealed is worth squat as the trade gets crowded and/or the other side gets smarter.
Now that's talking about technique . There are some traders on the various boards that reliably post winning ideas. But they are few and far between and finding them is like finding this.
Now that's talking about technique . There are some traders on the various boards that reliably post winning ideas. But they are few and far between and finding them is like finding this.
Last edited:
https://www.elitetrader.com/et/threads/tape-reading-chat-room-cont.56373/
This was the quintessential thread on tape reading and I was happy to participate. You will be able to tell from reading the thread why one can't do this anymore. But this thread is better then any book you will find on the subject matter.
This was the quintessential thread on tape reading and I was happy to participate. You will be able to tell from reading the thread why one can't do this anymore. But this thread is better then any book you will find on the subject matter.
Today's Tape (Time & Sales) tools incorporate some smarts to make it easier to read. XT for instance began conglomerating the volume of last transaction using a configurable time window. Jigsaw Tools attempt to reconstruct the market orders before the split at the exchange using different methods.
They both report the size trading, the price, and whether it is hitting or lifting and allow you to alert on large orders as well as other things (Cum. Delta in Jigsaw tape).
There are a tonne of prop futures traders purely watching the prints in the DOM for their trading. The Tape provides the exact same info so surely it's possible to learn enough skill to trade from the tape alone!?
Maybe add some sort of visualization of the volume accumulating at prices to help in maintaining a mental map of actual liquidity... ie Vol Profile ... and you should have all you need.
Check out the Jigsaw Trading material on reading the order flow for starters. Summarized as you are looking for buying and selling interest to decrease at pullbacks (slower tape), absorption at prices (easy to spot size trading at one price.. getting trapped / absorbed), and then traders hitting / lifting the opposite way.
Get a feel for how that trading activity plays out in your market on different types of days (speculative / institutional trading etc) through just watching the tape + get rid of rookie trading patterns (chasing market, revenge trades, not getting out when wrong, getting out when nothing changed etc) and you could be the tape reading king! No time machine necessary... or indicators.
Definitely a worthwhile skill for at least managing your entries / exits if trading outrights using some other trading system.
They both report the size trading, the price, and whether it is hitting or lifting and allow you to alert on large orders as well as other things (Cum. Delta in Jigsaw tape).
There are a tonne of prop futures traders purely watching the prints in the DOM for their trading. The Tape provides the exact same info so surely it's possible to learn enough skill to trade from the tape alone!?
Maybe add some sort of visualization of the volume accumulating at prices to help in maintaining a mental map of actual liquidity... ie Vol Profile ... and you should have all you need.
Check out the Jigsaw Trading material on reading the order flow for starters. Summarized as you are looking for buying and selling interest to decrease at pullbacks (slower tape), absorption at prices (easy to spot size trading at one price.. getting trapped / absorbed), and then traders hitting / lifting the opposite way.
Get a feel for how that trading activity plays out in your market on different types of days (speculative / institutional trading etc) through just watching the tape + get rid of rookie trading patterns (chasing market, revenge trades, not getting out when wrong, getting out when nothing changed etc) and you could be the tape reading king! No time machine necessary... or indicators.
Definitely a worthwhile skill for at least managing your entries / exits if trading outrights using some other trading system.
Nothing of what you mentioned those apps can do is new. But we should not need to be surprised that nothing is new because after all there are bids and offers and then trades print with volume. It's not like the order book has been reinvented.
When talking about tape reading one should define this term very clearly. The way it's been used by some it appears to be more like the numeric version of a short term chart. The original tape reading concerned itself with spotting potential turning points and really making sense of order imbalances. The letter definition is impossible today and the former is not really tape reading but more aligned with determining momentum.
When talking about tape reading one should define this term very clearly. The way it's been used by some it appears to be more like the numeric version of a short term chart. The original tape reading concerned itself with spotting potential turning points and really making sense of order imbalances. The letter definition is impossible today and the former is not really tape reading but more aligned with determining momentum.
Not sure why the latter would be impossible.. if you can spot size trading in a time and sales window, and it's effect / if it's being absorbed, how much is being absorbed at prices (doing some quick arithmetic), how aggressive buyers and sellers are (speed of the tape / volume flow) then you can identify imbalances... could also filter the T&S to generalize the data and slow the tape down. Sure there are tools to achieve this with less effort but reading the T&S is my idea of what pure tape reading woud entail.
Do you believe it's impossible because it's all too fast to take in each print? Not sure you have to take in each print to develop the feel.
I think XT only introduced conglomerate last trade vol in Version 7.17 which is relatively new 'today'.
My opinion is that the 'Tape Reading' style has been replaced by 'Order Flow' trading movement. The tape gives a lot of useful info and feel, though for monitoring actual price behavior as well as the order flow its less effort to use a DOM or chart or squawk commentary then read the price in each print. Also now there are tools like Bookmap and Auction Vista that take reading the order flow to a different level of convenience.. containing essentially a historical T&S (as well as historical depth) plus analytics built into them...
So to agree to disagree ... it is possible to be a pure tape reader and am certain they are out there.. . But there are more efficient tools to do the grunt work for you and provide a bigger perspective of imbalances to take advantage of. So you would likely add tape reading (the T&S) in addition to these other order flow tools.
I tell you exactly why it is impossible, especially for US stocks. To start with what most people see is not the complete market data feed, the US stock market is fragmented and what you see in your T&S is not really what is really being traded in aggregate. A lot of dark pool transactions are reported later (actually the rule is a max 90 second delay), so right now two huge orders may be crossed in an ATS (Alternative Trading System) but you do not see that at all. It is true that the traded volume even from dark pools (which are part of ATS) is eventually reported and ends up in the TRF (Trade Reporting Facility) but not in real-time. In fact the TRF does not even show which ATS the trades originated from. It's like you seeing a trade but you do not know whether it was transacted on BATS or Nasdaq, or the NYSE...
So, what is the point to watch and monitor T&S when at times 80% of all trades/traded volume are visible in real-time but at other times only 10%, volume weighted. The whole purpose is lost and hence nobody in professional space does it anymore. What is, however, being done is that hft subscribe to all exchange venue data and build their own order books and derive valuable information from that. But that is completely unrelated to "tape reading" (tape reading, which refers to the human observation of the order book).
I could give you several reasons why "tape reading" of futures data is equally flawed but I prefer to focus on one issue first, else the discussion gets completely messed up.
Let me know if you disagree regarding the cash equity side of things but if you disagree I expect solid and factual backup in the same way as I provided. Fair?
So, what is the point to watch and monitor T&S when at times 80% of all trades/traded volume are visible in real-time but at other times only 10%, volume weighted. The whole purpose is lost and hence nobody in professional space does it anymore. What is, however, being done is that hft subscribe to all exchange venue data and build their own order books and derive valuable information from that. But that is completely unrelated to "tape reading" (tape reading, which refers to the human observation of the order book).
I could give you several reasons why "tape reading" of futures data is equally flawed but I prefer to focus on one issue first, else the discussion gets completely messed up.
Let me know if you disagree regarding the cash equity side of things but if you disagree I expect solid and factual backup in the same way as I provided. Fair?
Is all volume reported in real-time in stocks - i agree no. In Futures - yes. Is the volume that is eventually reported, the only force acting in a market.. No.. most volume is probably a leg of some trading strategy / hedge / spread etc.
So why is it still worth reading the tape??
To time entries exits, form a bias etc, still recognize large players (even if their intentions are unknown). If the tape is slow, then there is not much interest in these prices so expect something to change or do something better with your time. If it is fast with large size printing then there is a lot of interest etc. Liquidity is what you are really looking for in the tape - how much is trading at these prices, and how much effort does it take to move through them. That is what you can gauge from the tape. I would think across all relevant asset classes which you could monitor too. Say for the T-Note, you would have it side by side across the yield curve (Bonds, 5 year etc). In E-mini futures you could add some context by watching a tape of some blue chips also... Just thinking out a loud... Sure you aren't able to nowadays jump on a move because you saw one large trader (Livermore ticker tape style).. but you can build a mental picture of the market and form a bias of the current state of liquidity.
A lot more information can be extracted, and I will just give a suggestion instead of repeating information and pretending I am the expert here. Check out the order flow material presented here by Jigsaw themselves and some other presenters. I think its video 2 that breaks down what the order flow, as can be viewed purely in the tape, and gives some actionable things to view. My understanding of markets aligns well with what is presented. I would be interested Zzzz1 in what you have to say about their market perspective on what moves prices / how markets work / why to monitor the tape. I am open minded to alternative views so hope you check it out.
I find it pretty funny that people who dismiss tape reading as hogwash either don't know what they are doing or have been part of the easy money crowd during the advent of electronic trading.
If you really think tapereading is all about ripping off the specialist, you are mistaken.
Also people always tend to confuse tape reading with staring at the DOM or at the Level2 Screen...it has nothing to do with it.
They don't have any idea what to look for and be like "it's all computers now, better focus on the charts". This is so ridiculous. A chart is not the market, it's just a graph of the history of last traded prices and you are missing a hell lot of info.
Thing is, reading tape is probably the very first thing one should learn. Trading is always the same. Paper tries to transact and you have to figure out which way they are going and which prices they are at.
In the golden days paper was stupid, now it wised up and uses algo's to disguise their actions.
Well alright then, time to learn the algo patterns. Takes some time but it's not as difficult as it seems.
Also you have to focus on the TAPE i.e. which size prints at which prices. If a stock goes up 20cts on 100-300 share blocks and all of a sudden someone prints 20K in a darkpool, it's pretty safe to asume that there is institutional interest at these prices.
If you know what you are doing, you can spot paper as well as retail activity. It's hard, but doable, but again if you think you can watch the book and hope someone is going to post big size that you can easily frontrun, you are 20 years behind...
If you really think tapereading is all about ripping off the specialist, you are mistaken.
Also people always tend to confuse tape reading with staring at the DOM or at the Level2 Screen...it has nothing to do with it.
They don't have any idea what to look for and be like "it's all computers now, better focus on the charts". This is so ridiculous. A chart is not the market, it's just a graph of the history of last traded prices and you are missing a hell lot of info.
Thing is, reading tape is probably the very first thing one should learn. Trading is always the same. Paper tries to transact and you have to figure out which way they are going and which prices they are at.
In the golden days paper was stupid, now it wised up and uses algo's to disguise their actions.
Well alright then, time to learn the algo patterns. Takes some time but it's not as difficult as it seems.
Also you have to focus on the TAPE i.e. which size prints at which prices. If a stock goes up 20cts on 100-300 share blocks and all of a sudden someone prints 20K in a darkpool, it's pretty safe to asume that there is institutional interest at these prices.
If you know what you are doing, you can spot paper as well as retail activity. It's hard, but doable, but again if you think you can watch the book and hope someone is going to post big size that you can easily frontrun, you are 20 years behind...