Tape Reading Chat Seminar Transcript

[Soultrader 12]

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/forums/imagehosting/1456c500c8eb8a.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/Videos/Flow%20of%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 10]

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 10]

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 10]

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 10]

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 12]

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 12]

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 10]

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 10]

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 10]

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.

[ant 10]

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.

 

That's correct TinGull. B/A is snapshot, T&S window is actual tick by tick.

[Soultrader 12]

Thanks Ant! We should do a MP chat sesssion one day together.

[keymoo 10]

Do you include bid/ask quotes on your tape or just trades? Great transcript - i ordered two tape books. I've had the tape up next to my chart for a couple of months now and I only watch the flow and maybe colour, but not the actual numbers just yet. I would really like to get to know the tape for scalping and timing longer term intraday trades.

[Soultrader 12]

Do you include bid/ask quotes on your tape or just trades? Great transcript - i ordered two tape books. I've had the tape up next to my chart for a couple of months now and I only watch the flow and maybe colour, but not the actual numbers just yet. I would really like to get to know the tape for scalping and timing longer term intraday trades.

 

What do you mean by bid/ask quote? The green colors tell me the contract was bought at the ask while the red indicates contracts being sold at the bid.

[keymoo 10]

In eSignal you can see the quotes as well as the trades at the bid and the ask. So if I place a new limit order, I can choose to see that popping up in the time and sales. I wondered if you had switched that on in TS or not. I switch the quotes off as it swamps the tape and just watch trades at/above the bid/ask. Thanks.

[TinGull 10]

Do you mean a Market Depth sort of thing keymoo?

[keymoo 10]

No its on the tape Tin. eSignal can show you the asks and the bids as well as the trades at the asks and the bids on the tape itself.

[stylelad 10]

[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

 

 

IMPORTANT!!

Dear Soul! Could you be so kind to tell me the name of that Russian writer and the title of his book about tape reading?

Thank you so much!

[Soultrader 12]

Its Techniques of Tape Reading by Vadym Graifer. The problem is, you can never learn to read tape through books. It has to be a visual learning process. I plan on making a condensed video on tape reading in the near future so you might want to check that out as well.

[Guest cooter]

eSignal can show you the asks and the bids as well as the trades at the asks and the bids on the tape itself.

 

Nothing special here. TS has the same feature as well; you just have to configure the T & S to show it on the tape if you want it that way.

[BackInBlack 10]

What do you mean by bid/ask quote? The green colors tell me the contract was bought at the ask while the red indicates contracts being sold at the bid.

Hate to be picky, here, but if I've got this right, when the price is red, it means contracts exchanged at the Bid; when green, it's at the Ask, with white being between the two when a spread opens. However, if the actual number of contracts is green, it means that they were bought, whether at the Bid or Ask, and vice-versa.

 

So if the the ES, for instance, was red at 1319.25 with a green 15 under "quantity," it would mean that someone bought 15 contracts at the Bid.

 

Agree? Disagree? I'm still trying to understand this.

 

Thanx in advance, guys.

[Blu-Ray 10]

I suppose it would depend on the platform your using for the time and sales, for example, in Tradestation if the price is green then the quantity is the same and vice versa.

 

Check with the company who supplies you the time and sales for verification as that would be a handy piece of information.

 

 

Cheers

 

Blu-Ray

[Soultrader 12]

Hate to be picky, here, but if I've got this right, when the price is red, it means contracts exchanged at the Bid; when green, it's at the Ask, with white being between the two when a spread opens. However, if the actual number of contracts is green, it means that they were bought, whether at the Bid or Ask, and vice-versa.

 

So if the the ES, for instance, was red at 1319.25 with a green 15 under "quantity," it would mean that someone bought 15 contracts at the Bid.

 

Agree? Disagree? I'm still trying to understand this.

 

Thanx in advance, guys.

 

Yes, best to make sure with your platform vendor. White simply means that the transaction took place between the bid and ask. A transaction can take place between the bid and ask even if the minimum tick fluctuation is 1 point. This occurs when a buy market order matches a sell market order at the same time but were not showing on the level 2 market depth data. Hope that makes sense.

[stylelad 10]

what are TAS usefull configurations? showing only more then 10 lots orders...What else??

[Soultrader 12]

what are TAS usefull configurations? showing only more then 10 lots orders...What else??

 

Sorry, what does TAS stand for?