I have been trading FX and indices (mainly DAX) now for almost a year using techincal analysis. I know that a lot of daytraders trading stocks uses tapereading, many hardly even use technical analysis. Still I have not understood what tapereading is all about for daytraders. What exactly is a tapereader trying to see compared to a technical analyst? For technical analysis it´s obvious what we're looking for, trends, breakouts, support and resistance etc. But what does a tapereader look for to base his descisions on, and are there any similarities?
What is the difference between traders using TA and tapereading?
- Thread starter erik_s
- Start date
If you study intraday charts for about 15,000 hours, you'll get a pretty good idea of what modern day tapereading is all about.
"What is the difference between traders using TA and tapereading?"
TA trader starts to need glasses at 10,000 hours and tape reader has coke thick glasses and head aches reading price at 15,000 hours. In all the years of reading the Dome/Volume, I have spotted two patterns that is useful, but not going to share.
TA trader starts to need glasses at 10,000 hours and tape reader has coke thick glasses and head aches reading price at 15,000 hours. In all the years of reading the Dome/Volume, I have spotted two patterns that is useful, but not going to share.
Both methods you mention ed are limited and do not represent viable alternatives. Modern traders use quant tools. If you want to compete in quant trading world you must get away from old methods and get some advanced tools. Take a look at this blog to see how some quant traders estimate probabilities. Trading is probability.
Tapereading is about watching how orders are processed, that's it. There is no pattern, there is just pieces of the puzzle in a larger context. That's how Tape Reading differs from TA and charts, because charts are just crutches in order to get a quick glance at the big picture.
As long as there is a consolidated Time&Sales, Tape reading will always be relevant, because you can see who is trading (see a bunch of sub penny prints, guess who just got executed...), how much is trading, how big the orders are and when activity picks up.
Don't believe all this "it's not usefull because of HFT" crap
As long as there is a consolidated Time&Sales, Tape reading will always be relevant, because you can see who is trading (see a bunch of sub penny prints, guess who just got executed...), how much is trading, how big the orders are and when activity picks up.
Don't believe all this "it's not usefull because of HFT" crap
The theory is, the markets move as a result of limit and market orders being submitted, cancelled, and executed. Most markets these days operate using order matching with the LOB (limit order book). LOB is effectively a double-auction mechanism where anyone can buy and sell. Tape-reading is interpreting the order flow with the intent to determine the future order flow and thus the future prices. Technical analysis, on the other hand, is traditionally the study of price and volume (not the orders).
Think of a doctor who wants to diagnose a disease. One way to do it is to look at the symptoms. Let's say a patient has characteristic itchy blisters, nausea, and headaches. The doctor recognizes this pattern of symptoms and determines the disease: it's chickenpox. This would be equivalent to applying the technical analysis to the market (as in, for example, fast moving average crossing above slow moving average). Another way is to look at a blood sample to see if you can spot the actual virus that causes chickenpox. That would be equivalent to tape-reading.
That is, order flow is the source, and price/volume are the symptoms (or perhaps "manifestations" is a better word).