Software for Automating Tape Reading?

[Mr_You 10]

Hello! I'm a total newb to trading. I've been a systems engineer for over 15 years now and ready for a career change. I'm mostly interested in tape reading and so that is the current path I am taking. But I am also interested in automated trading, quantitative analysis, etc. So I've been searching for which software I should invest my time and money. I did a quick search in this sub-forum and didn't find an answer.

 

Correct me if I'm wrong, but the latest versions of Ninja Trader and MultiCharts do not appear to offer automated trading with enough flexibility/tick detail to "read the tape". Or maybe MultiCharts comes close but their PowerLanguage is not flexible enough?

 

I'm also very interested in Python, R+RStudio, but the libraries available do not appear to be as complete as most trading-specific software packages. It would essentially require me to write my own functions which may not be a huge problem but it requires more initial effort to get up and running.

 

I understand Matlab is the dominant tool for quantitative analyst but R seems to have a lot of momentum. Its also free which greatly reduces your cost if your using multiple machines.

 

I realize I may end up using different software packages for different situations/requirements, but I would like to get started with automating tape reading first. So can anyone offer any direction? Thanks!

[Tams 20]

First, don't mean to pour cold water over your enthusiasm... trading is not a career. Don't expect this to be your career change.

 

 

About tape reading...

1. you have to quantify "What is tape reading"?

 

2. Ninjatrader (C++) and MultiCharts (EasyLanguage) have been around for a long time, pretty well anything a newb wants to do has been asked and tried before.

 

If you can imagine it,

if you can visualize it,

if you can quantify it,

if you can articulate it,

you can code it.

[Mr_You 10]

First, don't mean to pour cold water over your enthusiasm... trading is not a career. Don't expect this to be your career change.

 

Can you be more specific? Do most day traders who make a living in this field not have a "career" in this field? I realize it takes years.

 

About tape reading...

1. you have to quantify "What is tape reading"?

 

Not sure what you mean by this. Tape Reading is the oldest known method of watching the action.

 

2. Ninjatrader (C++) and MultiCharts (EasyLanguage) have been around for a long time, pretty well anything a newb wants to do has been asked and tried before.

 

From what I understand, and PLEASE correct me if I'm wrong, NinjaTrader and MultiCharts do not offer as much detail in their automation APIs as say something like Interactive Brokers API + Matlab or R or Python.

 

FYI, NinjaTrader uses C#.

 

I'll try to post an update soon.

[daVinciLite 10]

The only automated tape reading I've seen is at Schooloftrade.com | Learn How to Day Trade Futures, Crude Oil, Gold, E-mini. He has something called the “speed of tape”.

 

I use a footprint chart and cumulative delta to "read the tape."

 

Good luck,

dVL

[SIUYA 11]

Not sure what you mean by this. Tape Reading is the oldest known method of watching the action.

.

 

Dont get too hung up of definitions as that is an endless argument about the differences between tape reading and price action, I think Tams in his unique way is saying ---- spell out precisely what you are looking for the system/platform/program to do and then.... dont just give it a name that has different meanings to many different folks. there are threads here somewhere discussing this.

 

Sierra Chart is another - uses C++ - it has a version using TPO (i think - might be worth a look)

Ultimately each system is different and each has their advantages and disadvantages depending on what you wish to achieve....and you need to trial each and see what you like....often many people start with one and switch.

[BlowFish 10]

First, don't mean to pour cold water over your enthusiasm... trading is not a career. Don't expect this to be your career change.

 

 

About tape reading...

1. you have to quantify "What is tape reading"?

 

2. Ninjatrader (C++) and MultiCharts (EasyLanguage) have been around for a long time, pretty well anything a newb wants to do has been asked and tried before.

 

If you can imagine it,

if you can visualize it,

if you can quantify it,

if you can articulate it,

you can code it.

 

OK maybe I am being pedantic whilst for all intents and purposes what Tams says is true but there are things that you just can not do for example analysing multiple data streams (like order book analysis for example). Having said that TSSuport have made some changes in version 7.0 of MC to allow bid ask last analysis though to do this with historical data you will need IQfeed from what I understand, I am a bot sketchy on the details and am still talking to them about it. Ninja has some third party stuff written by a user called Gomi). This maintains a completely separate database of tick data with the required precision to do this sort of analysis.

 

Tams is correct though, I am just being 'picky' but there are some things (albeit pretty rare) that you will not be able to do due to the architecture of the products. 'Tape reading' (depending on what exactly you want to do) might be one of those things.

[bobcollett 10]

Mr-You

You are obviously clued up with all these programs you mention but as Tams asks "what is tape reading ?

Are you referring to the olded days ( Tams days) when you stood in front of a telex and you read the trades? And you made a decision on Union Steel at good volume.

Or are you referring to modern price action which relies on pullbacks.Where Oil pulls back to $105 in an uptrend.

You dont even need volume according to Al Brooks!

Whichever you choose,there is a subjective part in the trade,"is this the high/ low of the day?'

When your computer program can tell you that,I'd be very keen to buy a copy

bobc

[Mr_You 10]

I appreciate Tams and everyones posts. Really enjoying learning all I can about trading. Yeah I should clarify some things.. So "Tape Reading" vs "tape reading" (to me hehe)....

 

Tape Reading is: manually or algorithmically analyzing the tick-by-tick data for a given stock: bid, bidsize, ask, asksize, last, lastsize. This could be done in real-time or replaying "recorded"/saved data (for backtesting or manually observing) and/or relying on a data provider with near tick-by-tick data (one second or less snapshots).

 

So...

 

First I want to observe and study the market manually (literally "read the tape" for discretionary trading) while also learning my tick-by-tick capable tools. I'm sure I will probably end up porting some EasyLanguage based strategies later on. I've paid, not much really, a mentor for manual Tape Reading training for discretionary trading.

 

Regarding the tick-by-tick tools...

 

I have installed the MultiCharts v7 trial and visited it off and on. I'll check again tonight regarding its tick-by-tick analysis capabilities.

 

I found it VERY easy to install, connect, and demo: Interactive Brokers Trader Workstation, R, RStudio, and the IBrokers R package which connects R to IB via the TWS API. This setup is very appealing! It beats any opensource trading platform I've come across, but I need to further investigate IBrokers maturity. Who knows maybe I can contribute to the project.

 

I wasn't able to get the ibPy Python package (connects Python to IB TWS API) installed on this Windows XP installation. I will try it on Linux when time allows. But unfortunately the project looks abandoned (last release was Dec 2008). I may only use Python for utility purposes, not trading strategies.

 

I've toyed with Matlab in the past, but found it a little overwhelming. I like the simplicity and price of R and RStudio (a desktop OR browser based R IDE!!). Matlab will probably be a last resort.

[Tams 20]

if you like to tinker... give this a try

tradelink - 100% open source since 2008... 14,000+ downloads. - Google Project Hosting

[Tams 20]

another toy for the tinkerers

TickZOOM

[Mr_You 10]

Yeah I have looked into TradeLink and I am trying it for somethings, but I've experienced too many bugs. There doesn't appear to be a production quality release/branch emphasizing stability. I prefer a cross-platform solution, but I'm still checking into TradeLink occasionally.

 

I've also checked into Marketcetera, but there are some concerns there too. I'll check into TickZOOM. Thanks.

[MightyMouse 12]

If you are tape reading without knowing who is doing the buying or selling, you will do as well trading as you would by making a trade decision based on the flip of a coin.

[BlowFish 10]

If you are tape reading without knowing who is doing the buying or selling, you will do as well trading as you would by making a trade decision based on the flip of a coin.

 

Isn't supply supply and demand demand? Does it matter if it is someone hedging physical goods, an arbitrager legging into a position to offset another in the cash market, a market maker reducing exposure to balance their book, a speculator punting on longer term direction....well you get the picture.

[MightyMouse 12]

Isn't supply supply and demand demand? Does it matter if it is someone hedging physical goods, an arbitrager legging into a position to offset another in the cash market, a market maker reducing exposure to balance their book, a speculator punting on longer term direction....well you get the picture.

 

Blowfish,

 

It is but it isn't.

 

If I know you take a trade, i would act one way if i knew you were initiating a trade and another way if I knew you were ending a trade. Then add in if I knew how you trade. If I know that you had a short tolerance for risk, I would act one way. If I knew that you were a long term position trader, I would act or not act another way. The anonymity of the tape deprives us of this information.

 

On the other hand you can make judgements about the amount and quality of supply or demand and gain something from it, but I don't call that tape reading.

 

You can, or at least you could have, see on stocks who is putting up orders and if you know who they trade for, you can get an idea of who is buying and who is selling. In the pit you could see who, physically, is buying or selling. But the pit is just a sliver of volume these days with the advent of the electronic slot machine.

 

MM

[SIUYA 11]

my 2c -- problem with that MM is that there are too many participants to know exactly who is doing what.

The ASX used to show who was buying and selling by showing the broker designation, they then got rid of that as they found too many people were waiting to front run orders, and as everyone knew other people and they talked. Has it changed the market, stoppped people from trading etc; etc; no. It just got rid of the few people who relied on order flow to front run (sort of like the current court cases in the US ) After working on a floor, it was handy for short periods of time, only. I have plenty of stories whereby blindly following others and not following your own ideas ends up costing.

Nowdays the algos make up a lot of the market, and what is it that they are doing - many are merely executing an order over the day and splitting it that way, and often you can pick up variations of those early by tape reading - but personally I dont think it matters if it is people initiating new trades or exiting. I am with blowfish here.

For me, it is more important as to what the market does after I initiate a trade. The only thing that I care about is that others follow me in the the same direction (or am I just following them ??)

[Tams 20]

there are deductive methods you can use to screen out the participants.

there are theories, and there are school of thoughts,

some believe in them, some don't.

some find them useful, some don't.

[MightyMouse 12]

my 2c -- problem with that MM is that there are too many participants to know exactly who is doing what.

The ASX used to show who was buying and selling by showing the broker designation, they then got rid of that as they found too many people were waiting to front run orders, and as everyone knew other people and they talked. Has it changed the market, stoppped people from trading etc; etc; no. It just got rid of the few people who relied on order flow to front run (sort of like the current court cases in the US ) After working on a floor, it was handy for short periods of time, only. I have plenty of stories whereby blindly following others and not following your own ideas ends up costing.

Nowdays the algos make up a lot of the market, and what is it that they are doing - many are merely executing an order over the day and splitting it that way, and often you can pick up variations of those early by tape reading - but personally I dont think it matters if it is people initiating new trades or exiting. I am with blowfish here.

For me, it is more important as to what the market does after I initiate a trade. The only thing that I care about is that others follow me in the the same direction (or am I just following them ??)

 

Right about too many participants. And that is why tape reading is a lost art. it worked way back when volume was more transparent and much much lower. If you look at the volume of a stock that traded in the 1920's or 30's, you'll laugh. There were maybe 20 trades per half hour. That would give you over a minute to examine each trade and make a phone call to find out who put the big trade in. It was a lot more personal then. It was real "trading" and not what we call trading.

 

The electronic markets killed the pit traders. Some still trade but it is a shadow of what it used to be. A lot of those guys were unable to transfer the skills they learned in the pit to screen trading because they lost the feel they had in the pit when it was dominated by locals and floor brokers.

 

We are probably all thinking of different things when we think of tape reading and that adds to the confusion, but I think we all think that you do not have to know who is doing the trade. The point I initially made was made regarding the ability or lack of ability to know who it placing the trade.

 

MM

[BlowFish 10]

there are deductive methods you can use to screen out the participants.

there are theories, and there are school of thoughts,

some believe in them, some don't.

some find them useful, some don't.

 

Quite so, in fact I guess that's what makes a market.

 

Personally speaking I find focusing my efforts on detecting order flow (regardless of where it originates) is a more productive pursuit. Having said that (again for me) it is not wholly necessary to achieve my goals.

 

I know I have mentioned it in the past but Harris' book is a great resource for learning who trades and why they trade. It also provides fascinating (to me) material about precisely how they must trade to achieve their goals in the most effective ways.

[Tams 20]

Quite so, in fact I guess that's what makes a market.

 

Personally speaking I find focusing my efforts on detecting order flow (regardless of where it originates) is a more productive pursuit. Having said that (again for me) it is not wholly necessary to achieve my goals.

 

I know I have mentioned it in the past but Harris' book is a great resource for learning who trades and why they trade. It also provides fascinating (to me) material about precisely how they must trade to achieve their goals in the most effective ways.

 

can you post amazon's link to Harris' book ?

I would like to take a look.

TIA

[BlowFish 10]

can you post amazon's link to Harris' book ?

I would like to take a look.

TIA

 

Sure no problem Amazon.com: Trading and Exchanges: Market Microstructure for Practitioners (9780195144703): Larry Harris: Books

 

It is perhaps quite 'difficult' but crammed full of information. I found it fascinating and a couple of things have subtly enhanced how I view the market. I have written the odd paragraph about it on TL a couple of times in the past a search should spit out a 'micro review' or two.

[Tams 20]

Sure no problem Amazon.com: Trading and Exchanges: Market Microstructure for Practitioners (9780195144703): Larry Harris: Books

 

It is perhaps quite 'difficult' but crammed full of information. I found it fascinating and a couple of things have subtly enhanced how I view the market. I have written the odd paragraph about it on TL a couple of times in the past a search should spit out a 'micro review' or two.

 

wow... this looks like a heavy duty book.

will take a look

many thanks.

[BlowFish 10]

There is an extract of the first few chapters on the web somewhere. It appears to be an earlier draft of the published one. The published one is nicely laid out and has sidebars with anecdotes and illustrations of some of the concepts. It might be one to borrow from a library to see if it interests you.

 

If trading was taught like a traditional degree this would be the reading list for the 'how markets and their participants really work' module.

[Traderx59 10]

You, you may offer your coding services to others, in an attempt to see what other people are toying with as an opportunity to take money out of the markets.

IB has a contest for automated trading systems for college students.

Edited June 6, 2011 by MadMarketScientist
url removed

[Mr_You 10]

Thanks Traderx59! Yeah thats a good idea. I've been thinking about that lately. Some experience is better than none.

 

Regarding the software tools I've been investigating. I have mixed feelings about all of them resulting from annoying bugs and a high learning curve (from sophisticated proprietary software such as NeoTicker). Or the risk of using working but non-production ready software with very little recent updates (from open source software IBrokers R library).

 

As mentioned previously, my personal trading style (Tape Reading) along with separating the datafeed (IQFeed) and broker connection (IB) narrows the list of potential tools. Mathematical modeling is also very interesting. So a little more research to come I think.

[Pedro01 10]

My thoughts are - there are a lot of players and it's hard to imagine there's any collective opinion between them.

 

What you can be certain is that there are a lot of short term players and they are alltrying to make money off everyone else. As such, there are points at which you can predict people will be in pain and points at which people will be 'twitchy'.

 

I think that a good perspective of where those pain points could be, combined with tape reading when you get there can help. I am also sure that younger traders would not find tape reading as exhausting and so could do it for longer.

 

But Automated Tape reading? Buy/Sell signals programmatically? I don't think I'd trust it.