TAPE READING (chat room cont.)

[Lights]

or this dude is trying to cover $5,600,000 worth of stock that he is short.

Quote from ilganzo:

Right. Doing the maths $100 x 56,000 = $5,600,000.
The dude is trying to buy more than $5M of stock in one shot? Must be Paris Hilton financial adviser.

 

[Steve Tvardek]

Well, tape reading is much more applicable to NYSE stocks. Especially stocks that do between 300,000-2 million shares a day. Stocks like JDSU and SUNW do too much volume. The rebate traders would know how to trade these stocks a lot better than us NYSE guys.

Quote from eusdaiki:

None taken. I did look back throught the threat, and after thinking about it you guys are right... when you trade large blocks you shouldn't show your hand till you're done. sounds reasonable.

How wouls you apply this to a stock like jdsu or sunw where the average size on any price level is in 100k+ ranges?

 

[eusdaiki]

I'm a rebate trader myself, and Im used to looking into such stocks, so Im usually reding the tape more for figuring out which ecn is getting more liquidity than for figuring out what buyers and sellers are doing...
I havent been trading long, less than a year [therefore I expet my tape reading skills to be kindergarden level]. I started out trading NYSE stock, ge mostly. Then I figure rebates where a lot easier to get some moeny flowing my way, and now Im thinking about giving the nyse a shot again. As a side thing keeping my income from NASDAQ rebates to reduce the stress of momentum trading.

 

[Maverick74]

Quote from seasonedpro:

Someone mentioned on a previous post that if it was so easy to front run size it would be automated. I managed a small group and we had a grey box (would automatically put a trade on and trader would exit) that was based all on front running size orders posted on the NYOB. It relied on using the NX system to get fills as soon as the orders posted. It would automatically take the bid up to .10 up or hit the offer depending on if it was a size offer or bid. We scanned only stock with average volume of 150k - 1.5 million.

I can attest that the only time the box had any consistent profits was when the orders either stepped up or down. And the only traders who actually made money were the ones who could get out of the bad trades (the ones that didn't step) with a minimal loss and flip to the other side. In fact I saw more potential on taking the other side of the box that I eventually put the box on simulation, saw what trades it wanted to put me in, waited till the move didn't materialize then went contra the size. Moves were much more explosive when everyone who was getting in because of the size paniced out.

When the orders stepped it was a different story, but even then once the order was gone if nothing was behind it it was going right back down.

With that caveat in mind, I'm going against the size a majority of the time.

Like my moniker states I've been around for awhile and haven't seen posts as valuable as Maverick's in a long time, if ever.

Thanks for sharing your insight Maverick. Newbies could make base a system off his posts.

Thanks for the kind words. At my old firm, I knew many guys that created black boxes to do just what you described. They didn't seem to have much success either. The best ones I knew of where short only black boxes that caught stocks right off the open with offers stepping down.

The problem with the black box is, it will never do better then a good tape reader who can actually watch the prints. I don't think there are a set of rules you can write that would really be effective in making money on this. It's way too complicated.

There are many things I left out on this thread such as double prints, go along buyers, plus tick bids, minus tick offers, opening on a minus. Tape reading truly is a skill set that takes time to learn but is certainly an edge.

 

[Steve Tvardek]

What is your stance on double prints?

 

[coolweb]

I don't know about you guys,
but I just read some fantastic freaking posts by Maverick

VERY GOOD EXPLANATIONS.

Some of them are GOLD.

 

[Maverick74]

Quote from Steve Tvardek:

What is your stance on double prints?

Hi Steve,

Double prints are exactly what you want to see in strong and weak stocks. A double print means you have two buyers in the stock. You have to watch very carefully though, this is where I was talking about having your eyes glued to the screen for 6 1/2 hours. So many guys in my group would be surfing the web and not paying attention to the prints and would miss them. Even if you are watching, they are sometimes hard to see, you will simply see size flash twice very quickly. And don't always assume it's big size. Sometime you'll see 200 shares flash twice.

What is happening here is two buyers have left stock for the specialist to work. So any sales that come into the market, the specialist will split the order and give half to buyer A and the other half to buyer B. The reason brokers leave these orders with the specialist is because they don't have time to stand at the post all day and they also don't want to let another buyer push the stock up without them getting any.

This leads to another variation of this called the go along buyer. what this is, is when a broker knows there is a big buyer in the stock who is carefully buying at good prices. Instead of standing there all day and trying to work the stock, he will leave instructions with the specialist to tag along with the other buyer. In other words, whenever buyer A buys stock, I want to buy stock there too, same shares, same price. This is the go along buyer.

If you are long a stock and it's strong and you notice the double prints this is a sign that you should stay with the stock. This means there is a lot of stock left to buy and you should not get shaken out of the stock. Again, so many times, traders would miss these prints and would dump their stock because it would just go sideways for hours not realizing there are still two buyers left in the stock! Then at the end of the day, the stock would take off and close at the highs and they would be kicking themselves. It's so important to pay attention to every print.

And if for some odd reason you should see triple prints, they are rare but do happen, you better hold on to every share you've got, because that stock is going much higher!

 

[Steve Tvardek]

Maverick,

Thanks for the detailed explanation. I think double prints are much more meaningful during the day than right off the open. Do you agree? For instance, I sold a stock off the open the other day at an avg price of 130.66 (900 shares). Stock shows the figure below and there doesnt seem to be any buyers at all. But at the same time there are no aggressive sellers. Anyways, after about 10 minutes of waiting (he is printing 130.45), the stock spreads up to 131 even. At this point i am a little nervous. He double prints 130.70 with 2400 shares. Then a bid walks in for 1200 at 130.68. I get nervous cause i saw an uptick double print so i go market (this is a very thin and dangerous stock to be wrong in), get filled at 130.79. The stock then shoots straight down 40 cents. I end up getting back in and catching .60 cents and then another .40 cents. All in all the stock drops two points in the next 45 mins. Anyways, back to the double prints, do you think its more important to use them after the stock has somewhat established a direction as confirmation that that direction will continue?

 

[Maverick74]

Quote from Steve Tvardek:

Maverick,

Thanks for the detailed explanation. I think double prints are much more meaningful during the day than right off the open. Do you agree? For instance, I sold a stock off the open the other day at an avg price of 130.66 (900 shares). Stock shows the figure below and there doesn't seem to be any buyers at all. But at the same time there are no aggressive sellers. Anyways, after about 10 minutes of waiting (he is printing 130.45), the stock spreads up to 131 even. At this point i am a little nervous. He double prints 130.70 with 2400 shares. Then a bid walks in for 1200 at 130.68. I get nervous cause i saw an uptick double print so i go market (this is a very thin and dangerous stock to be wrong in), get filled at 130.79. The stock then shoots straight down 40 cents. I end up getting back in and catching .60 cents and then another .40 cents. All in all the stock drops two points in the next 45 mins. Anyways, back to the double prints, do you think its more important to use them after the stock has somewhat established a direction as confirmation that that direction will continue?

Yes, for sure. They only have meaning once you know whether or not the stock is strong or weak. In the example you gave, my guess is those two prints were sales and they got really good prices. And they probably sold all the way down that day. Off the open, when that stock squeezed, I would not be sure what is going on in that stock. Is it strong, is it weak, I don't know. Once the stock traded back down to the lows and made new lows, then I would be able to start identifying the seller.

BTW, if there is not any news in this stock and this is a stock you trade every day, it's very possible there is no real large buyer or seller in the stock. I pointed this out before.

Also, the uptick double print is not a big deal, it's the uptick bid you want to be worried about if you are short. After he printed 130.70, there was no real reason to be scared of the 1200 share bid at 130.68. Now had he printed the 130.70 and bid it or bid above it. Then you need to get out ASAP. Because those double prints then were buys, not sales. And they have more to go.

This can be very tricky off the open when a stock is all over the place especially a volatile stock. I avoided these stocks like the plague.

 

[shortseller]

Maverick74

Hey, I did want to thank you publicly as well as privately (sent a PM), I must have read this tread about a million times this weekend.

R.D.