estrader

I am a Tape Reader and I am a 100% purist, I don't use a chart when trading, just time and sales and nothing else. I only trade one market and that is the E-mini S&P 500 (ES).

Ok, I never like to misrepresent another person's argument The point I was trying to make is that ultimately, what is recorded in the T&S is the only thing that matters but trying to figure out whether an order @bid was a stop turned market or direct market order isn't worth the effort. The effort should be spent in assessing the overall impact on the market, if any, and it should be judged within the context of the entire market action. I am happy with my broker and to be honest, I don't need more than I already have. It has taken me years to figure this out. Read Jesse Livermore's "Reminiscences of a Stock Operator". I would argue that this book and the ones you have mentioned are all you will ever need. In fact, read "Reminiscences of a Stock Operator" again and again, you will learn something new every time. A work of genius. OK, practicalities of placing a trade is something every trader should know. I would argue that a trader should only use market orders to open a position and they should always have a protective stop.

Blowfish, now you have me confused. I study tape reading, that is all I do. That is how I trade. That is all I have been studying for the last 5 years and I can tell you that tape reading IS much more of an art than an exact science. You have tried to tell me that from the Time and sales record it can be determined whether a trade was a stop or limit order. Not only do I think that’s not feasible, I also say that it is superfluous. I have written my own proprietary trading applications and in order to do that I have to connect to my brokers API. When I wrote my first application I wanted all the information possible to determine all details of executed trades and you know what? It is impossible. When you consider the volume of data required and the bandwidth necessary to deliver it you will realise what I am saying and why. For a start, the data provided by my broker is, to use their terms, “Throttled back”, meaning that I don’t get every trade executed on the exchange. I doubt that my broker is unique in this aspect. If you doubt me, call your broker and ask them if they limit bandwidth from the exchange. Secondly, as far as I know the exchange does not provide information to my broker about whether a trade was filled @bid or @ask. The only information I get, along with date & timestamp, is LAST Price and LAST volume. In order to determine whether it was filled @bid or @ask it needs to be compared to the bid/ask quotes at the time it was filled to see which it was and this is prone to errors for a number of different reasons such as computer processor speed. Lastly, perhaps you have super high bandwidth direct connections to the exchange and have access to much more information than I do, but, and I mean no disrespect, if you honestly believe that ‘knowing’ if an order was an executed STOP or Market Hit LIMIT is going to give you some sort of edge then I have to doubt your ability as a trader and whether you really understand the tricks, the games and the tactics large operators use to keep the public baffled. There isn’t one technical aspect of the market you can know and use that will give you an edge, there is much, much more to trading than that. Suffice to say that nothing but hours, days, months and years of screen time, study and practice is the only thing that will make or break you as a trader. In my experience over the years of using trading forums it is only new traders that fuss over fine technical details like whether a trade in the time and sales window was a STOP or Market order or whether BID means selling or ASK means buying because they believe knowing this is going to make them rich. They want to be told that large orders @bid means selling so they can apply simple, rigid, mechanical rules to their trading. If it was that simple you wouldn’t have volumes of books dedicated to the art of tape reading.

Academic in a sense that I doubt it is going to make anyone a more profitable trader or shed anymore light on the direction the market is going to move. The reason I mention time & sales is because the OP brought up the subject. With literally 1000's of orders executing often in less than 1 second, I doubt that (by whatever means) determining which were stops and which were limits would help a great deal in trading.

Blowfish, The time and sales records the time, price and volume and I am led to believe that some data providers provide bid/ask information. It's true that STOP orders become market orders but that is academic. If someone wants to dissect and discuss the nuts and bolts of DOM and or the order book, that's fine. However time & sales only records what has happened and it is impossible to determine from that record whether the orders were all limit orders or stop orders that became market orders or any other combination. A typical T&S would look something like date, time, volume, price and the colour for bid/ask 10/12/2010, 10:30:00, 10, 1231.50 Using GREEN to represent BID, all you can say from the above is that 10 orders were traded at the BID price of 1231.50 on 10th Dec at 10.30. They could have been 10 stops that were hit from 10 individuals or 1 stop from a larger trader or 10 limit orders from individual traders, or 10 limit orders from 1 larger trader. Were they orders to Open a position or close a position? All this is something that you have to judge yourself, the Time and sales doesn't give you this information and nobody else can either.

All the time? I doubt that. I've been watching T&S on the ES almost everyday for the last 5 years solid and I can say that I've never seen it happen when the market is open. Google can say whatever it wants, I trust my own eyes. Besides, just go with 99.999% of the time, BID is quoted below ASK.

Firstly, the example you have given is impossible! The current BID price is always below the current ASK price. No argument, no if's or but's, it's as good as the Law. 1) BID = The highest price a Buyer is willing to buy 2) ASK = The lowest price a Seller is willing to sell If you think about that for a minute you will realise why there can never, ever be a situation where a seller is offering a stock below the highest bidder. It would be filled before it even got there. This is how the spread exists, it basically represents the difference in opinion between buyers and sellers. The colours aren't really that important because they might be set by the trading application, who knows, you could even have the T&S in a single colour like the ticker tape was many years ago in the days of Jesse Livermore. Just remember, the BID is ALWAYS quoted below the ASK. When the market isn't very active you can watch and see how orders are filled and determine whether it was filled at the BID or the ASK. There are two types of sitting orders I can think of, a STOP and LIMIT. - Buy STOP's are placed above the current Market price. - Sell STOP's are placed below the current Market price. - Buy LIMIT's are placed below the current Market price. - Sell LIMIT's are placed above the current Market price. A trader can use a STOP to close a position but they can also use a STOP to open a position. A trader can use a LIMIT to close a position but they can also use a LIMIT to open a position. If the T&S printed 50 @ 1200.25 Bid. This could mean 1 large seller who sold 50 at market to open a position to 50 individual small traders who had sell STOP's in the market to close their position. This is someone 'hitting' the BID. It could also mean that 50 small traders sold at market to open their position to 1 large trader who had 50 buy LIMIT orders in the market to open their position. This is known as a "sitter". There are a number of ways orders can be filled and whether they were being opened or closed and who was doing what that it really isn't worth bothering yourself about it. It's much more important to study the action of the market than it is trying to figure out whether they were STOP or LIMIT orders. It's good to understand the variables, but don't get too preoccupied about it.

No, I think you are a little confused. The market price is made up of two figures: 1) The current ASK price 2) The current BIDprice The Last price is the price a trade was executed. A person who buys @ market will be filled at the current ASK. A person who sells @ market will be filled at the current BID Orders sitting in the market can either be LIMIT or STOP orders. A Volume of 1 in T&S means that 1 buyer AND 1 seller have exchanged 1 contract. Do you see? There isn't enough information to determine whether the contract was a LIMIT order or STOP order that was filled.

It is more than just uncertainty. I have invested many years (5+) into this ‘game’, sacrificing so much of my time into studying and learning to becoming proficient. Hours spent in front of the screens day after day when I could have been doing something else. A loss can often make you feel as if it has all been for nothing. I find that more distressing than anything else.

I'm sure that there are many people in my position who get tired of reading "trade smaller positions" or "reduce your size" I trade the ES contract and the smallest that can be traded is 1 contract...if it were possible to reduce size (currently US$50/point) I would. Spread betting or trading a different instrument is NOT a solution to the problem.

FxGirl, This is one of the best posts I've ever read in a trading forum in over 5 years. Thanks!

Trading is not dead and it was never easier. Read ‘Reminiscences of a Stock Operator’ by Jesse Livermore...it was written about 100 years ago and yet is as relevant today as it was when it was first published... It can be summarised neatly and succinctly with his very wise quote: Anyone here who thinks they have to learn something new because the market has changed is fooling themselves. There is nothing new, at all. Learn to trade and the skill will last a lifetime.