Tape Reading Chat Seminar Transcript

[Soultrader]

Welcome! You have entered [Trading Room] at 10:33 am
[Trading Room]: Soultrader has entered at 10:33 am
[Soultrader] 10:33 am: okay lets talk about the tape.. and feel free to ask any questions
[MrPaul] 10:33 am: k
[TinGull] 10:33 am: awesome
[Bfbusa] 10:33 am:
[Soultrader] 10:34 am: just going to tell you how I see the tape. its one of my serious edges in
trading and i recommend every trader to learn it
[Soultrader] 10:34 am: im going to be talking about the YM tape since this is the only contract I
trade
[TinGull] 10:34 am: and any book recommendations would be awesome too
[Soultrader] 10:34 am: sure
[Bfbusa] 10:34 am: I recommend we write a book
[Soultrader] 10:35 am: theres not many tape reading books available.. but make sure to read
everything u can on Jesse Livermore, Humphrey Neill, and Wyckoff
[Soultrader] 10:35 am: I want to write one one day
[Soultrader] 10:35 am: also that Russian author... Vladmir i think
[Soultrader] 10:36 am: the older books talk alot about the ticker tape
[Soultrader] 10:36 am: which is different from the time of sales.. but the concept is the same
[Soultrader] 10:36 am: all they ever did was look for support and resistance and block prints on
tape
[Soultrader] 10:37 am: okay ... the YM tape is alot easier to trade than the ES
[Soultrader] 10:37 am: 10+ lots I consider big guys.. and the tape moves alot slower in my
opinion
[Soultrader] 10:37 am: so I seperate the tape into two columsn
[Soultrader] 10:38 am: http://www.traderslaboratory.com/for...c500c8eb8a.jpg

[jperl] 10:38 am: test
[Soultrader] 10:38 am: the left side represents all transactions.. while the right column
represents 10+ lots or more
[Soultrader] 10:39 am: im assuming all of you guys know how to setup this up on your platform?
[Soultrader] 10:39 am: all you need is price and size
[MrPaul] 10:39 am: yea
[jperl] 10:40 am: no
[Soultrader] 10:40 am: ok lets talk about litte guys vs big guys
[Soultrader] 10:40 am: Jerry.. what platform do you use?
[jperl] 10:40 am: platform?
[Soultrader] 10:40 am: trading software
[jperl] 10:41 am: IB
[Soultrader] 10:41 am: someone told me IB doesnt have a time of sales?
[MrPaul] 10:41 am: they do
[jperl] 10:41 am: it does
[MrPaul] 10:41 am: I thought initially they didn't
[jperl] 10:42 am: or at least my front end does
[MrPaul] 10:42 am: you have to use a third party software to access it
[MrPaul] 10:42 am: they don't offer it in TWS in real time
[Soultrader] 10:42 am: okay... well im not familiar with IB but in TS we can tweak the time of
sales window to show price and size only
[Soultrader] 10:43 am: i seee
[Soultrader] 10:43 am: im not sure I can help you with IB... i never used it
[jperl] 10:43 am: ok
[Soultrader] 10:43 am: okay back to little guys vs big guys
[Soultrader] 10:44 am: the real muscle is the right hand column known as the big guys
[Bfbusa] 10:44 am: ss ym 13
[Soultrader] 10:44 am: however, you can not disrespect the little guys
[Soultrader] 10:44 am: they will create momentum as they are usually late getting into the move
[Soultrader] 10:44 am: for example
[Soultrader] 10:45 am: lets say price ddeclines towards the previous days low.... first you will
see big lots or big guys stepping in
[Soultrader] 10:45 am: then you will see smaller lots like 10, 15 lots
[Soultrader] 10:45 am: then followed by single digit lots.. or little guys
[Soultrader] 10:46 am: this can fuel momentum and even a short covering can turn into a decent
rally
[Soultrader] 10:46 am: the big boys are prepared in advance to buy at certain levels so many
times u might see price drop below S1 a couple ticks and then reverse
[Soultrader] 10:46 am: they may be buying on the way down
[Soultrader] 10:47 am: okay.. with this in mind.. lets talk about timing entries
[Soultrader] 10:48 am: if youre good you can buy with the big boys...... but i try to enter before
the 10-15 lots come in and before the little guys start buying
[Soultrader] 10:48 am: so try to be the second group in
[Soultrader] 10:48 am: by the time the fourth group or little guys start buying.. im already
dumping half
[Soultrader] 10:49 am: sometimes you will see all red... but with no decline
[Soultrader] 10:49 am: this indicates strong support
[Soultrader] 10:49 am: someone is buying on the way down..
[Soultrader] 10:50 am: did i lose anyone?
[TinGull] 10:50 am: nope
[Soultrader] 10:50 am: okay good
[Soultrader] 10:50 am: lets talk about the flow of the tape
[Soultrader] 10:50 am: this is very important
[MrPaul] 10:50 am: k
[Soultrader] 10:51 am: when there is good flow.... there is good price movement.. when tape is
caught in traffic, you want to step aside
[Soultrader] 10:51 am: take a look at this 1 minute video: http://www.traderslaboratory.com/Vid...0of%20Tape.swf
[Soultrader] 10:52 am: the flow confirms your position.. if you are long, you want to see tape
running fast and smooth
[Soultrader] 10:52 am: once it starts to stall, you want to be exiting portions
[Soultrader] 10:52 am: vice versa for shorts
[Soultrader] 10:53 am: its a very interesting thing to watch..... u can clearly see the tape hault
[TinGull] 10:53 am: like right now
[MrPaul] 10:53 am: yeah good point
[Soultrader] 10:53 am: yea no point trading right now
[MrPaul] 10:53 am: thats great
[Soultrader] 10:54 am: price will usually hault... spend a little time at a pivot and then you should
seee the right column turning green
[Soultrader] 10:54 am: this can indicate a reversal
[Soultrader] 10:57 am: okay lets talk about price rejection vs price acceptance
[Soultrader] 10:57 am: with the YM... if youre not careful itll fake alot of new traders out every
single time
[Soultrader] 10:58 am: because it likes to take out the lows or pivots by a few ticks and then
reverse
[Soultrader] 10:58 am: this is where I like to watch for price acceptance or price rejection
[Soultrader] 10:58 am: lets say the YM breaks above VAL.... make sure to check if there are big
lots coming in a few ticks above it
[Soultrader] 10:59 am: if you see 10+ lots on the buy side.... there is price acceptance
[Soultrader] 10:59 am: but if you only see the little guys buying and then all of a sudden 10+ lots
on the right column in red all over the place... this is a warning signal
[MrPaul] 11:00 am: ahh
[Soultrader] 11:00 am: takes a little practice but youll be able to judge supply vs demand from
tape
[Soultrader] 11:00 am: u can use this same concept to play breakouts
[Soultrader] 11:00 am: lets say price is hugging the VAL or VAH or any pivot
[Bfbusa] 11:00 am: out -10
[Soultrader] 11:01 am: and there are no sellers on tape but plenty of 10+ lots with no price
advancement
[Soultrader] 11:01 am: you can usually anticipate a breakout
[Soultrader] 11:01 am: its a powerful setup
[Soultrader] 11:02 am: watch price trade at the resistance... as if it was hugging it... watch the
tape and you should see more demand
[Soultrader] 11:02 am: you can usually get in before the breakout and feed it to the breakout
traders
[Bfbusa] 11:02 am: Jemes please save tranascript
[Soultrader] 11:02 am: yes im saving it no worries
[Soultrader] 11:03 am: okay lets talk about false moves
[Soultrader] 11:03 am: this is a hard one.. you need good tape reading skills and memory for this
[Soultrader] 11:04 am: lets say price advanced 20 points
[Soultrader] 11:04 am: but during the entire 20 point move... you hardly see any big lots coming
in
[Soultrader] 11:05 am: one sec... watch tape now.... its running faster
[Soultrader] 11:05 am: its not the greatest looking tape but improvement from before
[Soultrader] 11:06 am: anyways.... getting back to my point, if you seea lot of single lot traders
moving price, expect a reversal
[Soultrader] 11:06 am: dont jump in with longs
[Soultrader] 11:06 am: time your entry for a short setup
[Trading Room]: Gordon G. has entered at 11:06 am
[Gordon G.] 11:07 am: gm
[MrPaul] 11:07 am: gm
[Soultrader] 11:07 am: gm
[Soultrader] 11:07 am: i guess we all missed that r2 piovot trade
[Soultrader] 11:07 am: nice 30pts right there
[MrPaul] 11:08 am: it's continuing the trend from yesterday
[MrPaul] 11:08 am: late yesterday
[Soultrader] 11:08 am: anyone have any questions on tape?
[MrPaul] 11:08 am: do you ever see large lots comming through and then a swift reversal?
[MrPaul] 11:08 am: as in equally larger lots absorbing the move
[Soultrader] 11:09 am: you mean large lots on the ask and then a reversal?
[MrPaul] 11:09 am: or is that rare?
[MrPaul] 11:09 am: yeah
[Soultrader] 11:09 am: its rare
[MrPaul] 11:09 am: ok
[Soultrader] 11:09 am: one thing though
[Soultrader] 11:09 am: now that you mentioned it
[Soultrader] 11:09 am: sometimes you can spot out a 100lot trader
[Soultrader] 11:09 am: or even a 80 lot trader
[Soultrader] 11:10 am: what happens is i like to follow this guy... kina like follow the leader
[Bfbusa] 11:10 am: .
[Soultrader] 11:10 am: but then..... u see 80 lots being sold 2 ticks later
[Soultrader] 11:10 am: what does this tell you? this trader thinks hes wrong
[MrPaul] 11:10 am: ahhh
[Soultrader] 11:10 am: i have seen many reversals take place just from this information
[Soultrader] 11:11 am: its pretty amazing
[Soultrader] 11:11 am: just very hard to catch unless you are starting at tape
[Soultrader] 11:11 am: im pretty glued to the tape for the first 60 minutes
[Soultrader] 11:12 am: oh i forgot.. lets talk about bracketing tape
[Soultrader] 11:12 am: now this is for scalpers
[Soultrader] 11:13 am: some of you are familiar with how i start bracketing tape looking for short
term resistance and short term support
[Soultrader] 11:13 am: test
[TinGull] 11:13 am: .
[TinGull] 11:14 am: 115 lot
[TinGull] 11:14 am: holy cow
[Soultrader] 11:14 am: lets say price trades at $5, $5, $6, $6, $7,$6, $5, $7, $5.......... the short
term bracket is $5-$7
[Soultrader] 11:14 am: i have the 115 lot in white
[Soultrader] 11:14 am: meaining?
[TinGull] 11:14 am: no idea
[TinGull] 11:14 am: mine was in blue
[TinGull] 11:14 am: no idea what the blue means either
[Soultrader] 11:15 am: blue as in ask?
[Soultrader] 11:15 am: hahaha
[TinGull] 11:15 am: I have them come through as red and green
[Soultrader] 11:15 am: TS is playing games with us now
[TinGull] 11:15 am: and every sooften blues come through
[TinGull] 11:16 am: what does the white mean?
[Soultrader] 11:16 am: anyways.. i covered pretty much the basics of tape
[Soultrader] 11:16 am: white means in between, which makes no sense for YM
[MrPaul] 11:16 am: yeah what does white mean i see it as inside 768.90 etc
[TinGull] 11:16 am: thats what I think the blue means too...which always confused me with it
being inside of a dollar spread
[Soultrader] 11:17 am: wrines was asking the same question.. no one had an aswer
[Soultrader] 11:17 am: well perhaps that 115 lot was sold at the bid
[Soultrader] 11:18 am: cause it was at 12258 and now we are at 47
[Soultrader] 11:18 am: and i dont think a 115 lot is stupid enough to buy smack at the weekly
pivot resistance
[Soultrader] 11:18 am: who knows though
[Trading Room]: matdog has entered at 11:19 am
[TinGull] 11:19 am: nice to know
[Soultrader] 11:20 am: anybody have any questions?
[Soultrader] 11:20 am: i think im out of things to say
[matdog] 11:20 am: i am late sorry
[Soultrader] 11:20 am: i might get inspired
[Soultrader] 11:20 am: gm matdog
[MrPaul] 11:20 am: i'm chewin on the info
[Soultrader] 11:20 am: no worries i saved a script
[Soultrader] 11:20 am: ill post it in the forums
[Soultrader] 11:21 am: and you can ask questions if u want anytime
[TinGull] 11:21 am: and as soon as my new computer comes that can handle the data inflow
nicely, I'll be chewin on it more to
[Soultrader] 11:21 am: in intraday trading.. tape reading is an serious edge
[matdog] 11:21 am: nice. thanks Soul.
[Soultrader] 11:21 am: because not many traders are tape readers
[Soultrader] 11:21 am: its the purest form of information
[MrPaul] 11:22 am: certainly an edge
[MrPaul] 11:22 am: thanks Soul
[MrPaul] 11:22 am: im sure i'll have more questions
[jperl] 11:22 am: any good reads on this subject
[Soultrader] 11:22 am: in poker.. you can spot a mans tell
[matdog] 11:22 am: does tape rading works all the time?
[Soultrader] 11:22 am: in trading.. you can judge supply vs demand just from tape
[Soultrader] 11:23 am: serious serious edge
[Soultrader] 11:23 am: tape reading will work everytime and will never cease to work
[Soultrader] 11:23 am: every other tool may stop working sometime
[Soultrader] 11:23 am: but tape you can always rely on
[Soultrader] 11:24 am: jperl..i highyl recommend reading Humprhey Neil's "Tape reading and
market tactics"
[Soultrader] 11:25 am: and also the russian author.. let me look it up
[jperl] 11:25 am: ok thanks
[Trading Room]: Gordon G. has left at 11:25 am
[Soultrader] 11:26 am: its called techniques of tape reading by vadym graifer
[Soultrader] 11:26 am: actually not sure if hes russian
[MrPaul] 11:26 am: cool, everybody go click my ads so i can buy some tape reading books

[Soultrader] 11:26 am: hehe
[MrPaul] 11:26 am: lol
[jperl] 11:26 am: I have the Graifer book....I don't see much discussion of tape reading in that one
[Soultrader] 11:27 am: the only real way to learn tape though is to stare at it
[matdog] 11:27 am: Soul, how do you think Chris Schumacher's CD, Techniques of Tape
Reading
[Soultrader] 11:27 am: yea... its hard to find good tape reading books
[Soultrader] 11:27 am: maybe ill write one
[Soultrader] 11:27 am:
[Soultrader] 11:27 am: im not familiar with it matdog
[MrPaul] 11:27 am: i
[MrPaul] 11:27 am: i'll buy one*
[Soultrader] 11:27 am: hehe
[Soultrader] 11:28 am: tape reading is a very hard topic to talk about.. its alot easier to show
visually
[TinGull] 11:28 am: more videos!
[matdog] 11:28 am: I agree.
[Soultrader] 11:29 am: i think Humphrey Neill's book was the originating book that got me
hooked on tape reading
[Soultrader] 11:29 am: haha yea ill make more tape reading videos... its just that my TS keeps
freezing when recording live lately
[Soultrader] 11:29 am: might need more ram
[MrPaul] 11:29 am: do you find the placement of the tape right next to the chart better than
having somewhere else?
[MrPaul] 11:29 am: just do to the ease of darting over from candle to price?
[Soultrader] 11:29 am: yea i like it close to my chart
[MrPaul] 11:30 am: okay
[Soultrader] 11:30 am: yea.. i rely on tape and TICK heavily so I keep them on the same monitor
[Soultrader] 11:30 am: i dont have to move my head
[Soultrader] 11:31 am: i used to just stare at tape and it made no sense
[Soultrader] 11:31 am: after 1 month it still made no sense
[Soultrader] 11:31 am: 2 months... no sense
[Soultrader] 11:31 am: by my 3rd and 4th month.. i was seeing clues
[Soultrader] 11:32 am: test
[Soultrader] 11:32 am: it took me 6-10 months to really understand tape to use it as aan edge
[Soultrader] 11:32 am: im still learning everyday
[Soultrader] 11:34 am: well hope this helped.. if you have any questions on tape feel free to post it in the forums.. ill do my best to help

[Blu-Ray]

James

Great transcript, sorry I wasn't there, but great read !

Just a few questions:

Do you only use / trade off the tape around pivot points S/R levels, or do you find relevence elsewhere as well?

What if you see a big lot trader come in on the buy side, but really it maybe the big money just covering their shorts? Is this where staring at the tape comes into it?

Have you / Do you think it would be possible to scalp off the tape in the short term bracket as you mentioned ?


Once again, great transcript.


Cheers

Andy

[JayRemy]

apologies for not making it today james but thanks for saving the script.
prolly wont be in chat till next week. (really busy at work at the mo )
cheers jay.

[matdog]

Soul
sorry for been late this morning. the script is great and clears out many of my questions.
i have a silly question. if we see the market is rally, and suddenly we see alot big red prints, does that mean the big lot traders aren't really try to short but cover their postion or the market is about to reverse.
thanks for the script.

[matdog]

i mean someone long 70 lots and short 35 lots when they up 5 points, and short quater postions when they up 10 points and quater postion when they up 20 points.

[Soultrader]

	Quote:	Blu-Ray
	James Great transcript, sorry I wasn't there, but great read ! Just a few questions: Do you only use / trade off the tape around pivot points S/R levels, or do you find relevence elsewhere as well? What if you see a big lot trader come in on the buy side, but really it maybe the big money just covering their shorts? Is this where staring at the tape comes into it? Have you / Do you think it would be possible to scalp off the tape in the short term bracket as you mentioned ? Once again, great transcript. Cheers Andy

Hello Andy,

Q: Do you only use / trade off the tape around pivot points S/R levels, or do you find relevence elsewhere as well?

A: Its important to look at the tape at your S&R levels as these are the levels I look to enter a trade. I also use the tape to confirm my position by reading the flow of the tape.

Q: What if you see a big lot trader come in on the buy side, but really it maybe the big money just covering their shorts? Is this where staring at the tape comes into it?

A: It really depends when you see the big lots coming in. If the market is in a decline and all of a sudden you see big lots at the ask, this can indicate short covering. If the market is in an uptrend and you see big lots coming in this can be a further confirmation of the trend.

Q: Have you / Do you think it would be possible to scalp off the tape in the short term bracket as you mentioned ?

A: I used to scalp off the tape during the doldrums but I hardly do it anymore. By using the brackets I mentioned, a 5-8 pt scalp is possible. However, I usually do not recommend scalping.

[Soultrader]

	Quote:	matdog
	Soul sorry for been late this morning. the script is great and clears out many of my questions. i have a silly question. if we see the market is rally, and suddenly we see alot big red prints, does that mean the big lot traders aren't really try to short but cover their postion or the market is about to reverse. thanks for the script.

Hi Matdog,

Im not too sure what you. Are you asking what if I see big lots at the bid at a rally?

If so, it depends on what part of the trend. Are we seeing large lots on the bid at or near R1 or any other significant resistance level? If this is the case, I will usually bail out or even initiate a short if I am flat.

Big traders will usually start dumping at key levels. If price is traveling from the daily pivot to R1 and big lots are being sold to.... I may let price chop around for a bit and do its thing before I decide to sell.

[matdog]

yes, i mean the market just start to rally when 80 lots at the ask come in, but as prices go up 5 points, we see 40 alots at the bid.

[ant]

James, excellent chat session on tape reading. Very helpful the way you clearly highlighted what we ought to be looking for in the tape. Thanks!

In case some folks are not already aware about this, but one thing worth noting about using the bid/ask in TradeStation (i.e., red/green/white in the T&S window) is that TS only provides a snapshot for the bid/ask. That is, TradeStation only updates the bid/ask about once a second so the bid/ask is not always accurate. This is also true for the IB data feed. I do not use IB, but have read about this on other forums. For some traders, using the bid/ask snapshot may be good enough. Anyway, something to think about if you use TS or IB and rely on the bid/ask heavily for your trading.

[TinGull]

I had heard that TS will provide snapshots of B/A for indicators, but the T&S window is actual tick by tick...please correct me if I'm wrong.