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Tape Read Sing
Tape Read Sing
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F
irst, it must be said that tape-reading is and flow of orders as they occur in the pits. It is a
a kind of luxury, at least these days. It “chicken or the egg” phenomenon, because floor
is not necessary to tape-read to be a traders, with their frequent in-and-out scalping tech-
successful trader; tape-reading simply niques, create the very tape they are trading. Other
gives you an extra edge — an edge that takes your than rumors and news flashes that filter past their
trading to the next stage of excellence. Sound tape- trading stations, they have nothing else to go on but
reading skills are essential for getting the best pos- the tape.
sible entry, holding onto winning trades beyond your Some of the tape-reading skill is simply a product
profit target, and are sometimes responsible for keep- of intuition. If you are a strongly intuitive type, you
ing you out of bad trades altogether. already have a head start on developing this skill.
Those able to hear a piece of music and anticipate
WHAT IS TAPE-READING? what the next movement will be, or those who in
Tape-reading gets its name from the old “ticker tape” listening to someone speak can finish his or her
machine that used to feed stock quotes to brokers sentences, are those who are strongly intuitive and
before the advent of computers and LED displays. A will likely make great tape-readers.
small, glass-enclosed printing press would spit out a But there is also a science to tape-reading that can
continuous paper ribbon, on which would be typed be taught, and fortunately, it is not rocket science!
order size and price quotes as trades were executed. Moreover, there is a discipline I will teach you that
Fortunately, we no longer have to crowd around can sharpen what little intuitive power you possess
the ticker waiting anxiously for the tape to give us a into a profit-making talent.
quote on the stock we are interested in. We simply
type the symbol into our computerized, electronic READING TIME AND SALES
charting system and we are given a trade-by-trade, First, let’s talk about the science involved. There are
streaming “tape” of the action in real time. two primary sources of the tape as we now know it:
If you read through the great stories in Jack time and sales (T&S) and Level I quotes (the bid x ask
Schwager’s Market Wizards volumes, you will find sizing that you see in your trading or charting work-
a theme running throughout the 60-odd biographies station). Level II, Island Book, and other tools show-
collected there: tape-reading. Besides having nerves ing market depth are not, strictly speaking, essential
of steel, most of the world’s greatest traders are also to tape-reading, since they are not primarily con-
cerned with order flow at the current market price.
Let’s start with the first T&S. At any point during
the trading day, your T&S indicator should look
by Thomas Carr, Ph.D. something like what you see in Figure 1. The order
LEELA CORMAN
Watching these numbers change over time can give even ORACLE INCREASING SELL PRESSURE
more information. The rules are simple:
ORCL 45 11.17 11.18 116 11.17 20
ORCL 25 11.17 11.18 132 11.18 8
■ As ask size increases and more trades of large size
ORCL 12 11.17 11.18 154 11.17 32
go off at the bid, there is selling pressure and the
ORCL 10 11.17 11.18 155 11.18 1
stock is likely to go down over the next few minutes
ORCL 7 11.17 11.18 185 11.17 5
■ As bid size increases and more trades of large size ORCL 1 11.17 11.18 238 11.17 23
go off at the ask, there is buying pressure and the
FIGURE 4: INCREASING SELLING PRESSURE. It’s pretty clear that the 11.17
stock is likely to go up over the next few minutes. bid will drop down to 11.16. To reach equilibrium, the offer will also drop lower.
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