Tape Reading, Watching for Price Rejection

[Soultrader]

Tape reading is perhaps the hardest but most effective skill in trading. When I first started learning the tape, I would stare at it for 8 hours a day for approx 10 months before it started making any sense to me. After hundreds of hours of practice you start to see visual clues on the tape that will help you time your entries and warn you of short-term price reversals.

In this picture I want to go over just one method on tape reading. Although this does not happen all the time, this pattern is one of the most highly effective methods to capture a short term price reversal. The concept is simple, however, the timing is hard. This can happen in a matter of 1-2 seconds so if you miss it you pretty much have to pass on it.

Here's the method: As price approach a key level, watch the tape carefully. What you are looking for is a quick price rejection on the tape. Preferably 1-3 prints of a certain price and then a quick rejection back down/up. For example, if my key price level is 12100 on the dow mini's, I want to see 1-3 prints of 12101 then a quick rejection back to 12099, 12098, 12097. etc...

A picture is worth a thousand words. (see attachment)

In this example, we saw a beautiful single print at 11043 then a quick rejection of price. There was simply no buyers willing to bid at the 11043 level. We then saw prices fall on its own weight from lack of demand back to 11034.

[namstrader]

Soultrader I am very interested in learning more about tapereading. Do you have other great examples of your observations of the tape to share? greatly appreciated.

[Soultrader]

Hello namstrader,

I do have a couple videos posted on tape reading. I will try to make more this week.

Here are the links to the vidoes:

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

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

If you have any questions, feel free to post them here.