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Presented By: Geoffrey A. Smith DTI’s Chief Instructor
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. DTI Partners, Inc. and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the futures trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of DTI Partners, Inc. may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Past perform ance is not indicat ive of fut ure result s. 2
Tape Reading 101
Opens Relevance vs Importance Ranges
Opens Open of the Year Open of the Quarter Open of the Month Open of the Week Open of the Day Open of the Reference Bar Half Hour Open The Open of the Year is the most important The Half Hour Open is the most relevant .
Bridge Relevance and Importance A number is relevant when it has a reasonable ability to influence the current market action. Open of the Day > Open of the Year A number is important as it’s order of magnitude increases. Open of the Year > Open of the Day .
Ranges Like Opens Year Quarter Month Week Day Reference Bar Half Hour .
Ranges 2 Some Ranges can extend their importance with the voracity of their numbers A High or Low that contained the market two or three weeks ago can come back into focus and become a market changing event. The next Chart displays a daily chart leading up to September 4 .
00 Held for 4 weeks 109. 2010 Support around 1112.75 was the low on December 31 The ES broke below 1109 at 5:45am on Jan 22 The market reached a low of 1086 by 15:00 on Jan 22 .Daily Chart ES Jan 22.
A numbers importance derives from its magnitude All numbers are meaningful .Summary Opens Represent Points of time in the market that create Key Numbers Ranges represent levels in the market that create key numbers A number is most relevant when the market is trading near it.
Tape Reading 201 Repetition of Numbers Higher Levels Natural Numbers .
Repetition of Numbers Seeing the same number more than once is interesting. . Seeing the same number more than 10 times reason to take notice. Seeing the same number on 5 to 6 different occasions is noteworthy. Seeing the same number more than 20 times is a clear statement from the market.
25 The key number is between 29-31 Notice there is 100-200 points difference in the numbers .Higher Levels (the digits in front) In Looking at numbers.25 The May 2009 High was 929.50 The November 2009 open was 1031.50 The March 2009 open is 731. but also noticed Example: The 2009 High of the Year is 1128. the higher levels should be excluded.
Natural Numbers are Halves and Wholes In the ES Natural numbers are the 100 and the 50 level 1200.Natural Numbers Some Numbers will exert influence regardless of repetition. 1300. 11500.00. 1250.00 In the Dow Jones Futures Natural numbers are 500 and 1000 11000. 12000 .00.
Summary 201 Repeated numbers become more important when they repeat more often Higher Levels should be shed when comparing numbers. but remembered for their significance Natural numbers are always important even when not repeated .
Tape Reading 301 A Pattern in Numbers Strength of Numbers .
Each market has a Basic Pattern The Basic Patterns are helpful to know They are not EXACT In the YM the Basic Pattern is Quarters In the ES the Basic Pattern is Eighths .A Pattern in the Numbers Not all Patterns are the same.
The First three numbers are irrelevant to the pattern: 11025 . and 13000. 75. 12075. 11050. and 100 Therefore in the YM we would expect key numbers at 10025. 50.Quarters Pattern The Quarters Pattern Breaks the market down into equal Quarters on a 100 point Scale. The Quarter levels are 25.
37. 75. 1125. 1687. 1350. 1462. 62.Eighths Pattern The Eigthts Pattern Breaks the market down into equal Eighths on a 100 point Scale. The First two numbers are irrelevant to the pattern: 1237 . 25. 1575. 1237. 50. and 100 Therefore in the ES we would expect key numbers at 1012. The Eighths levels are 12.50.50. 87. and 1700.
Strength of Numbers Through Observation you will find some numbers exert greater influence than others. In the ES 1250.00 to 1252.00 would be surrounded by a buffer range extending from 1248. but not the only Examples A strong number often creates a buffer range.00 Stronger numbers can create wider ranges Therefore it can be more difficult to know . The Natural numbers serve as good.
Summary Patterns can identify levels of support and resistance Basic patterns of quarters and eights can be applied to certain markets Strong numbers can exert an influence to create a buffer range. .
Tape Reading 401 Pattern Recognition .
.Pattern Recognition This is the true tool of the tape reader Some people are more adept at this than others Jesse Livermore read the tape. and his explanation of what he was doing was both frighteningly simple. and seemingly impossible to follow.
or repetitions. The fluctuations were from the first associated in my mind with upward or downward movements. or weeks.Patterns in Prices – The Message of the Tape As time passed. But what the dickens does that matter? Your business with the tape is now . or months. Livermore began to believe he could discern patterns. Time and again I see this happen. The reason can wait. predicting the direction that different stock prices would take: "Say that after studying every fluctuation of the day in Sugar I would conclude that the stock was behaving as she always did before she broke eight or ten points.jesse-livermore. and remembering past performances I would write down what it ought to do on Tuesday and Wednesday. in the waves of numbers that flowed each day from the tape. Later I would check up with the actual transcriptions from the tape. The reason for what a certain stock does today may not be known for two or three days. It doesn't go into explanations.not tomorrow.“ For more Information on Jesse Livermore and Patterns go to: http://www. I would jot down the stock and the price on Monday. He began to write the numbers in a notebook and tested himself.htm . But you must act instantly or be left. but the tape does not concern itself with the why and wherefore.com/price-patterns. That is how I first came to take an interest in the message of the tape... Well. Of course there is always a reason for fluctuations.
Some things you can do to train your mind.Ways to develop the Skills Recognizing Patterns in markets is a learned behavior. Logic Puzzles – A puzzle deriving from the mathematics field of deduction Pioneered by Charles Lutwidge Dodgson (Lewis Carroll) Sudoku – Here is a game specifically designed to find and develop patterns in numbers. Good Tape Readers are Great at Sudoku .
Logic Puzzles can help to train your mind.Summary Pattern Recognition is a critical tool to any tape reader. Jesse Livermore was adept at recognizing the patterns in the tape. There is NO Simple answer .
745.EXAMPLE Time of Day Gathering Numbers Mini Pivots Reading the Tape www.dtitrader.com 800.7444 .
com 800.dtitrader.745.Time of Day Open Close ES (emini S&P) 15:30 15:15 NQ (emini NASDAQ) 15:30 15:15 YM (emini Dow) 15:30 15:15 Globex (night session) 15:30 08:30 Day Market 08:30 15:15 Markets open Sunday 17:00 15:15 www.7444 .
com 800.7444 .Gathering Numbers Globex High Globex Low Previous Day High Previous Day Low Globex Open Day Market Open Month Open Week Open Year Open 1079.75 www.00 1057.50 1076.25 1065.00 1113.00 1070.00 1078.75 1063.745.dtitrader.00 1062.
00 1065.75 1078.dtitrader.75 1079.00 1063.00 1062.00 1076.7444 .50 www.745.25 1070.com 800.00 1057.Arrange Them in Order High/Low 1113.
com 800. If all markets are above the open.745. look at the open of each 30 minute bar. look to go short www.dtitrader. look to go long If all markets are below the open.Mini Pivots Using the gathered numbers.7444 .
com 800.dtitrader.745.Tape Reading Start watching the markets and watch to see what they do Look at what they can do and what they can’t Let’s look at the market www.7444 .
dtitrader.7444 . Questions? www.com 800.745.
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