Tape Reading, Watching for Price Rejection

[Soultrader 12]

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 10]

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 12]

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/forums/trading-videos-members-only/297-tape-reading-traders-laboratory.html

 

http://www.traderslaboratory.com/forums/trading-videos-members-only/323-tape-reading-part-2-traders-laboratory.html

 

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

[doddy 10]

I can't see the 2 tape reading video you attached.Tks,Rdgs.

[Guest forsearch]

I can't see the 2 tape reading video you attached.Tks,Rdgs.

 

Videos posted are for premium members only, like namstrader.

[method 10]

I have a question about tape reading.

 

I'm currently studying the DAX and read the DOM ladder 1 hour every day, but I find it so easy to lose concentration and think about other things, and sometimes I just stop and start playing music or do other things.

 

Do you have any tips on this? Did you ever doubt what you were doing? I mean, you spent A LOT of time tape reading before it actually begun to make sense.

[zdo 20]

I have a question about tape reading.

 

I'm currently studying the DAX and read the DOM ladder 1 hour every day, but I find it so easy to lose concentration and think about other things, and sometimes I just stop and start playing music or do other things.

 

Do you have any tips on this? Did you ever doubt what you were doing? I mean, you spent A LOT of time tape reading before it actually begun to make sense.

 

Most traders should develop some tape reading skills for certain situations (in the same way a military general should still know how to fire a machine gun, etc.)

 

But ( in the big picture ) it requires

1 a certain aptitude / talent . It doesn’t require extreme ‘autism’ but it does require a natural degree of ‘savant’

2 a natural fascination / attraction to it

3 then a lot of screen time and development of execution skills

(4 and most likely, to be an adept at it, it requires an early start at it in one’s career – a la Tiger Woods )

 

These days, with programmable graphing capabilities, ‘visual tape reading’ is becoming more feasible. ie one does not have to be a digits freak to ‘tape read’

 

Maybe cut back to 15 minutes a day then adjust from there...