Psyched out by the Tape

[Minetoo 10]

Has this happened to anyone? You get into a position and then based on the activity on the Time and Sales tape get shaken out? Afterward, you look at your charts and ask yourself, ‘Why in the world did I get out?’ In the futures markets, is it possible for the big players to “paint the tape†with small lot orders and fast contrary movement to shake out the weak hands? Could it be that the tape attracts an inordinate amount our attention because it is the only thing really moving? Kinda like an infant fascinated by shiny, jangling set of keys?

Finally, does anyone here successfully trade futures without the tape?

[walterw 10]

Hi Minetoo... since I am at TL I tried to learn tape, it has been dificult for me to learn and take the most advantage, maybe because I did not put the time required to learn... I still can trade futures without tape... still I believe that learning can be a good idea, its a matter of investing time on the learning curve, James can really tell you the edge he has after he payed the screen time required to understand it.... cheers Walter.

[brownsfan019 17]

  Minetoo said:

Finally, does anyone here successfully trade futures without the tape?

 

Mine, I don't use the tape at all, if that's any consolation.

 

There's probably some value there and as Walter said, it would require time to study and learn how to properly use it.

[Jakew 10]

I dislike stock index futs tape. I would rather play a stock index future based on the moves of the underlying instrument than watch this fast moving spectacle of exaggerated emotions and sometimes deception that is futures tape. Actually it is big orders, rather than small, that cause the psyche out effect even more often. I've learned to disregard the emotional and deceptive moves of futs and concentrate on the index moves instead. I still have to watch the futs tape for decent execution (tactical) but I do it reminding myself "stupid on the left, stupid on the right" (to maintain a more strategic orientation"...)

[Minetoo 10]

So Jake, you just trade the cash and watch the futures' charts for a heads up?

[torero 10]

I think you cannot wholly rely on tape to base your trading decisions, since there are alot of noise in there. I use it to get the general ideas how big the general involvement of traders are at critical areas (S and R, pivots, High Low of day, etc). Say, if I see a few contracts selling or buying vs a few dozens contracts going by, then it gives you hints on how to get a better idea if the prices will break or not. Of course, this is relative, it's why I watch it and review the video recorded past sessions to gain that sense of relativity. After a while, I get an idea what constitutes average volume vs higher than average volume. From there, I can see if there are chances of a breakout or not. But I usually don't do anything until the breakout happens or fails and confirmed and then take action.

[dalby 10]

if you are getting psyched out by the tape - don't use it

 

simple. i traded futures for a while w/o tape. it is certainly not necessary to use. i do use it, but it is not necessary. so, if it causes you trouble... don't use it

[Soultrader 12]

Here is my input. Each market has their own personality and I think it is important to read the tape differently accordingly. For example, on the YM you might want to pay special attention to big lots while on the ER2 it might be better to read the flow of the tape. The YM is a jumpy contract full of emotion due to the tick size. Therefore you need to be able to filter out the noise that will appear.

 

On the other hand, big contracts in which the tick size is bigger tend to be less jumpy. For example, the big Nikkei with a tick size of approx $90 is pretty clear when it comes to tape reading. With each bid/ask approximately 400-600 lots each, you can easily spot out 300-500 lots vs little guys, strenght at resistance due to tape, weakness at support, etc... Now with the 30 year bonds, I have found tape reading to be pretty useless as it is too thick. Perhaps the flow of the tape is something to read instead.

 

Tape reading takes tremendous time to learn. Only an experienced eye can really use tape soley to trade in my opinion. I think the biggest difference is the amount of time traders spend watching their platforms. Do you tend to watch charts most of the time throughout the day? Numbers? Sectors? I spend a good 50% or so of the time staring at tape for various markets. It has become a habit in which I have become extremely reliant. Now this has been turning me into more of a pure tape reader as time passes. The only downside to this is that I do not gain some of the insights that other traders do that stare at charts.

 

One other way to filter out noise is to identify what type of day it is. Trend vs rangebound. Who is involved? Short term traders? Longer term traders? Once you are able to identify this quickly, tape reading will become easier because now you know what to look for. If short term traders are involved only you might want to look for lack of demand on tape at tests of the high or previous day high. If volume is good throughout the opening range, maybe you might expect a break to the upside so tend to look for the flow of the tape and big lots that come in right before a key resistance level, etc...

[BennyHey 10]

Don't know if anyone is still watching this thread but I have started to watch tape more during my daytrading and can see a clear advantage to it. At first I did not like it as it would have the same effect as having CNBC on in the background would have, make me close out a good position early, or not take a trade I should have. That said I have read a couple books and watched numerous books on the subject and I now believe it gives me an edge.

 

I use the tape to help my timing on my entries ie. I will try and make up for the spread by timing my entries on dips or pops on the bid and ask. As I continue to learn I will try and post something a little more helpful but the main idea is to watch the highs on the ask and lows on the bid.

 

Having said that the tapes is only useful to intraday scalping. If you are trying for 3-14 day swing plays a tick or two wont make any difference toward the overall profitability of your trading.

[BennyHey 10]

I got a couple PM's asking for Tape reading resources here is the reply I sent:

 

Hubert Senters from TTM has some good ones on their site under the free video section:

 

http://www.tradethemarkets.com/public/department61.cfm

 

you'll have to do some looking around but they are there.

 

 

Here is Alex from Pure Tick with a few nice videos:

 

http://puretick.com/BB2/viewtopic.php?t=381

 

I'll look around for some more....

 

I think there are a few good ones on youtube.com believe it or not.