Question About Time & Sales

[beeker1121]

Hi,

I'm becoming more and more interested in trading based on a time & sales window, a.k.a. reading the tape, but I have a lot of basic questions.

It's my understanding that in the e-mini futures, the S&P for example, for each buyer there is an equal seller(s) and vice versa. However, whenever I look at the tape and see a buyer at say 1390.50, I do not see the equal seller going through at the same price.

I was told by a friend that they only show one because they don't need to print it twice. If that's true, how is it decided whether a buy or sell order is shown on the tape?

My goal is to hopefully gain enough skill in reading the tape that I can trade profitably with it, but as you can see I have a lot basic questions to get out of the way. I've read multiple books on the subject, the most popular like Tape Reading and Market Tactics, Techniques of Tape Reading, etc., so I have a good understanding of how accumulation/distribution, price testing and rejection, shake outs and the like work book-wise, but when I try to apply these principles in a live market I can't seem to make it work. I believe the main reason is I still have to learn the basics thoroughly.

Lastly, are there any good books, courses, etc, that teach modern tape reading based off the time & sales window for the futures?

Sorry for the long post and I appreciate any advice.

[Harlequin]

	Quote:	beeker1121
	It's my understanding that in the e-mini futures, the S&P for example, for each buyer there is an equal seller(s) and vice versa. However, whenever I look at the tape and see a buyer at say 1390.50, I do not see the equal seller going through at the same price.

The tape only shows that a trade happened, for there to be a buyer there must have been a seller. If you are referring to it being coloured red or green that just indicates that it was executed at the bid or ask.

[beeker1121]

So when I'm looking at the tape and I see a trade going through at 1390.50 and it's colored green, that only means that the trade went through on the ask and not that it was someone buying, rather there was a buyer and a seller and it just happened to go through on the ask?

[smwinc]

It depends on your software.

99% are just showing:

if the last price on the tape is less than the previous last price (n < n-1) then it will be displayed in red.

If the last price on the tape is greater than the previous last price (n > n-1) then it will be displayed in green.

You are seeing red for a downtick, green for an uptick. Generally an uptick is because someone lifted prices to hit an offer (ask), or prices fell because someone downticked prices to hit a bid.

I say generally, because that's not always the case. Especially in markets where there is variable spread (e.g. DAX, most thinner futures/stocks), it can change. Let me try and draw an example.

A = Offer/Ask
B = Bid
*** = Traded Price

1.



A
A
A
A
B*** <--- last traded price at the bid.
B
B
B

2.



A
A
A
A*** <--- last traded price at the ask. Price is "upticked" by TWO ticks.
<--- SPREAD (the gap) also widens as traders pull their offers up.
B <--- Previous last traded price at (1)
B
B
B

3.

A
A
A <--- previous traded price level at (2)
A*** <--- last traded price at the ask. Price is "downticked". Someone inserts an Ask into the Spread, and it's hit.
B (spread has closed).
B
B
B

In part 3, price is downticked as well as traded at the ask / offer.

-------

If you are trying to learn to read tape, I highly recommend reading straight from a good price ladder where you can see the bids and offers as well.

That way, you see the whole picture:

Implied Supply
Supply
Equilibrium
Demand
Implied Demand


Cheers.

[Harlequin]

Thanks smwinc, you explained it a lot better than I could.

beeker1121,

I've been trying to think of any good resources to learn tape reading and there is not a lot about. Soultrader has some good videos on this site, they have been moved to the premium area so you'll need to sign up for that. Other than that I'd recommend taking the 2 week trial at Trade The Markets, go through every video on Hubert's newsletter with tape reading, scalping or live trading in the title and also the members only webinar "Day Trading Seminar - Scalping the Markets".
As Hubert would say teaching someone to tape read in a book is like trying to teach someone to swim over the telephone. To learn you need to spend a lot of screen time, open a DOM and a time and sales window, close all the charts and practice.

[BlowFish]

On numerous occasions over the years I have watched the tape to try and "get it". I think it is as much art as science. Thats probablly why not much has been written about tape reading from T&S. It's probably as 'pure' a way to trade as you can arrive at. Do you plan on using the DOM (depth of market) along side to try and guage what was advertised vs what actually sold?

Over the years there have been odd nuggets of wisdom about tape reading often buried deep amongst the mire at Elite Trader. A bit of patience and careful searching might dredge them up. There was one guy who's name escapes me who posted how he learnt and basically it boiled down to watching live and then printing out every single print and going over it all again after market hours. It may have been a poster called FutureTrader71, its been a long time and my memory is not so good.

If you find anything interesting please share it here.

[darthtrader]

ahh good stuff, FuturesTrader71 is the guy on elite. This thread "Market Depth patterns" is pretty interesting.

He made a great point as far as recording the entire session with camtasia with the tape and DOM up and then going over it again after the market with the chart.

From my experience with the tape is to just have patience, I still really get nothing from it after a year of trying but I haven't worked that hard with it.
I wouldn't really waste much time with learning materials outside of screen time, that Hubert quote is probly spot on.

[DbPhoenix]

Tape reading is nothing more than monitoring the current price action and asking: Is the price going up or down right now?

Even the most novice observer has the ability to see that prices are moving higher or lower at any particular moment or, for that matter, when prices seem to be going nowhere or sideways. (Markets do not always have to be going somewhere!) It is also fairly easy to watch a price go up and then tell when it stops going up - even if it turns out to be only a momentary pause.

If you can learn to follow the price action, you will be two steps ahead of the game because price is faster than any derivative. You may have heard the saying, "The only truth is the current PRICE." Your job as a trader will become ten times easier once you accept this. This means ignoring news, opinions, and personal biases.

When watching price, the first thing we want to know is how fast, how far, and in which direction. It takes two points to measure these things. One will always be the current price, the other a "reference point”.

"The study of responses ... is an almost unerring guide to the technical position of the market." Wyckoff

The second is to watch for the market's response to a particular condition, i.e., to anticipate a particular behavior. For example, if the market has been at a very low volatility point and just begins breaking out of it's particular trading range, one might anticipate that the price would begin to accelerate in an impulsive manner and not run into immediate resistance. Or, on a directional play, if the price is moving in an impulsive manner in a trending market and then pauses to catch its breath on a mild reaction, one would expect it then to continue on in the direction of the trend. When there is a particular behavior to anticipate, it is easier to watch the price to see if it acts according to one's expectations.

Tape reading is not watching every trade that passes by (a monotonous task) but rather keeping an eye out for unusual impulsive action, unusual volume, or just observing the way the price trades at significant levels. Each price swing has forecasting value as to what the next most immediate move should be. We then follow the price action to see if that move plays out. (Linda Bradford Raschke)

[tradertomdotnet]

on the Emini ladders there is no way to tell how much wil; trade at a "level" esp during a new event. Stops are needed...!!

	Quote:	BlowFish
	On numerous occasions over the years I have watched the tape to try and "get it". I think it is as much art as science. Thats probablly why not much has been written about tape reading from T&S. It's probably as 'pure' a way to trade as you can arrive at. Do you plan on using the DOM (depth of market) along side to try and guage what was advertised vs what actually sold? Over the years there have been odd nuggets of wisdom about tape reading often buried deep amongst the mire at Elite Trader. A bit of patience and careful searching might dredge them up. There was one guy who's name escapes me who posted how he learnt and basically it boiled down to watching live and then printing out every single print and going over it all again after market hours. It may have been a poster called FutureTrader71, its been a long time and my memory is not so good. If you find anything interesting please share it here.

[beeker1121]

Thank you all for your responses and information, smwinc the visual representation helped a lot! I also found that elitetrader thread and will be reading that through.

I haven't given much thought to incorporating the DOM along with the tape, due to the many games that are played. With the tape, these are actual orders that have gone through and nothing can change that, so that's what I've been focusing on the most.

Harlequin, I've seen a couple Hubert's videos, one was on tape reading the YM, and I've been to the Trade the Markets site before and it's gotten my interest. Have you ever been in his chat room or studied under him? If so, did you find his information on tape reading to be helpful?

I noticed that in Soultrader's and Hubert's videos on tape reading, both of them bracket price on the tape. I'm in the middle of reading Reminiscences of a Stock Operator by Jesse Livermore and he too, from what I understand, would try to bracket price between S/R levels and then watch how price reacted when it approached these levels. I'm going to start paying much more attention to this.