Learning Tape Reading & Time of Sales

[ant]

Hi Soultrader,

Great site! Very relevant to the way I trade. I don't use indicators either and use price action, Market Profile (daily and composite profiles) to identify a confluence of support/resistance levels, and market internals for trading.

Your tape reading videos were quite interesting, but I couldn't really follow along what you were doing. I would like to learn to tape read using time and sales and was wondering where I could find more information on how to develop that skill. More tape reading videos would be great. Thanks.

[Soultrader]

Welcome to the club ant! Thank you for your compliments. The tape reading vidoes were not the ideal video since they took place on Sept 6 when the markets was absolutely dead. Its very hard to read about tape reading and learn it so I will do my best to make a video on Monday.

Here is a couple things you should look in the tape.

1. Green vs red. Green prints show the transactions took place on the offer indicating buyers want to buy badly. Red prints show transactions on the bid indicating sellers just want out.

A row of red prints indicates short term panic and vice versa.

2. Most of the tape is noise. What you want to look for in tape is when price approaches your key trading level. You want to see price rejection. For example, if the ES shows prints of 1298, 1298, 1299, 1300, 1300, 1301, 1299, 1298... Notice the single print at 1301 and a price rejection back down to 1298.

If your pivot point was at 1300, this could indicate a short term revesal.

3. Watch for big players. In the YM it is relatively easy to see because 10 lots is considered big. In the ES it can be a little harder. Anytime you have red prints of 10, 20 lots this indicates selling pressure. This works well at key pivot levels.

4. Watch for the flow of the tape. A smooth rolling tape indicates market interest. A slow moving tape indicates a lack of interest. In a trend, if the tape is flowing smoothly this can be a confirmation of the trend. However, after a decent run if the tape starts to slow down like it is in traffic, you may need to watch out. The markets could chop around or reverse.

5. Learn to read tape by bracketing it. Pick any price level and just bracket. Once price breaks that bracket they will enter a new zone. I studied the box theory in Nicolas Darvas' famous book, How I Made $2,000,000 In The Stock Market and applied it to tape reading.

[dtx]

I would love to learn on this topic as well. Tape reading is one of the skills I have trouble learning. Will be looking forward to that video. Thanks

[Soultrader]

Posted a new tape reading video for Sept. 11, 2006. Not an exciting morning session but a couple interesting lessons.

http://www.traderslaboratory.com/for...aboratory.html

[ant]

Soultrader,

Thanks for the tape reading videos! They were very helpful. One question though... When do you decide to reset the bracket while tape reading? On the start of every new bar? Thanks in advance.

Antonio

[Soultrader]

Hello Antonio,

I dont really have a set rule for reseting the brackets. You can basically start with any set price. The main focus on bracketing price is to understand whether price is moving up or under a bracket. Let's say you bracket price at any random price level. After watching price bounce back and forth it breaks the short term resistance and moves into a new bracket.

This information tells me that price is going higher in the short term. Remember, my method of tape reading aims for short term price reversals or continuation. You must be quick to pull the trigger.

I guess if you were to put a rule on price bracketing you should reset as soon as the current bracket is no longer valid. If price breaks lower support, reset and make a new bracket. If price breaks uppoer resistance, reset and make a new bracket as well.

Hope this helps.

Regards,

Soultrader