Friday, April 18, 2008

Thoughts on tape reading

Yesterday prd trader asked me about tape reading. He has some nice intraday setups. The funny thing is I like be able trade his style while he wants to learn tape reading.

If my tape reading skills was good I would be making decent money. Tape reading has been a lot harder since the nyse hybrid and I am still figuring things out. There is a trade off from reading the tape. Most of the times you I get so focused on the details that I miss out the big picture. I am trying to move away from watching the tape too closely and get better with charts.

Here are some things to look for if you want to practice tape reading.

Long side:
  • Watch for large offers getting taken out.
  • Watch for bids stepping up.
  • Watch for bids refreshing.
  • Make sure the tape is active.
  • Watch for large offers coming in trying to push the stock down but stock holds firm.
Short side:
  • Watch for large bids getting taken out.
  • Watch for offers stepping down.
  • Watch for offers refreshing.
  • Make sure the tape is active.
  • Watch for large bids coming in trying to push the stock up but stock stalls.
Perhaps the Dinosaur, Evolution, and the one on the come up can add more to this list.

Some resources

10 comments:

PRD trader said...

Ty obatrader for ur valuable post,its great help.I appreciate it.

traderWokao said...

odatrader, I read your blog everyday. Keep up the good work.

OBAT said...

It's good to know there's people reading my blog. Thanks for the support.

Anonymous said...

keep postin - i read everyday- more charts too of what you traded where would be good. this tape reading one was good post.
c

Anonymous said...

If you want to know who is reading...I read every single day as well from the other side of Atlantic.

Pier

Dinosaur Trader said...

OBAT,

I agree that tape reading is much more difficult post hybrid. I think Sanglucci still does it quite a bit. I really don't bother, as most quotes are 1x1 or 1x2 and flash so quickly that I have a hard time gleaning much information from them anymore...

Pre decimalization and pre-hybrid, there was a lot more useful information with the quotes, and it was a fun way to trade.

-DT

Sanglucci said...

Great post OBAT... I still think tape and level 2 is king but at the same time I'm starting to lean over towards the chart and trend trading as well. So what I'll do is get a picture of a stock from the chart and check out it's levels and sort of make a prediction then get a read on the tape to either support that theory or not. But once I am in the trade I'm watching where the prints come out and just reading the price action trying to FEEL if that stock is going up, going down, setting me up or doing nothing

Sanglucci said...

As for additions to your rules there I would say you want to really get a sense of who is stronger the buyer or the seller. At certain pivotal points you want to recognize if a buyer is holding up a stock and is strong enough to get through all the sellers or recognize when that buyer is gone. It's a tough game this tape reading shit but I think it's a necessary part of daytrading and a useful tool if you're just a technical guy too.

OBAT said...

Sanglucci made some great points. The stock you want to trade should be an active stock that is setting up near important levels, like breaking out of a multiday consolidation.

If you see that the tape is active and volume is picking up, then the chance of a breakout is higher.

Tape reading is not easy, but with daily observations and ass rapes you start to get a feel for it.

PRD trader said...

Hi, obatrader,i added u in blog roll,could u please add me to yours.

About Me

I have been trading for 5 years. It took close to a year before I became profitable. I find that I am improving gradually each year. My method of choice is scalping. My edge lies in tape reading NYSE stocks and staying on the side of the specialist. That is the method I learned when I started. As I build up my capital I will try new styles and trade new markets. In late 2006 my trading hit a rough patch after the introduction of the NYSE Hybrid system. For most of 2007, I have been on a search for new strategies that would help me adapt to the market.