Software for Automating Tape Reading?

[Mr_You 10]

I appreciate everyones comments. Well I've decided to just get started any way I can with whats available to me.

 

So I'm looking at MarketDelta, NeoTicker, NinjaTrader, and free/trial/cheap data feeds. Ninja Trader appears to be the most user friendly to the newb.

 

I'm studying up on Market Profile, Market Auction Theory, Supply/Demand analysis methodologies.

 

If anyone has any comments regarding these tools/methods I would be very glad to hear them. Thanks again!

[steve46 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.

 

If I may make a point here, because I do this every day, and most of my decision making is related to a very specialized analysis of supply & demand as well as what some call "reading the tape"...

First, supply & demand always works...I have never seen a time when that principle failed

Second, reading the tape is the way I confirm that my analysis of the location of overhead supply and underlying demand is correct..(after all, we are all still human beings and subject to error in terms of our analysis)

Finally, what most call "tape reading" is actually trying to read order flow via the DOM or through a secondary indicator (volume or "cumulative" volume indicators) and while that does provide a type of information, generally speaking it is not particularly useful when push comes to shove...

What I mean is simply this....in addition to the resting orders already in the market, there are participants who are motivated to act from the sidelines when price touches a "Key Reference Area"....Using cumulative indicators, or even reading the DOM you cannot know whether they will come in or stand aside....reading the time & sales strip I CAN see this action as it happens and determine if the action is sufficient to take me where I want to go.

I bring this up because it is the synergy between supply/demand analysis (which creates the background picture) and tape reading (which confirms that my analysis is correct) that allows me to "get it right" with a high degree of accuracy. If there were automated software that could do this, I believe that information would be difficult if not impossible to keep secret for long..

 

Good Luck

Steve

[bobcollett 10]

Dear Mr You

I think you are getting confused

You started this thread with tape reading and now you'ved moved to Market Profile.

Tape reading is simply VOLUME

How is PRICE reacting to changes in VOLUME ?

Market Profile is a waste of a year!!

Your supply / demand analysis is getting closer

I would like to recommend a tape reading book "Tim Ord :The Secret Science of Price and Volume"

Its easy to read.You trade the pull backs with RULES. And you can trade breakouts.

BUT like all books, its a guide!!

Kind regards

bobcollett

[FulcrumTrader 10]

I have seen all the latest and greatest "tape reading" software these days but none of it is all that effective imo. As far as looking at the tape all day, looking for "tape reading" specific set ups, no thanks. Watch the tape intently for a couple of days and then see if you want to shoot your head off by the end of the week.....LOL!

 

There are much better ways to see what the market order flow and limit order activity is doing to price through more simplistic visual means imo. You could use footprint style of charts or watch price/delta/up-dn tick together as candlesticks, etc.

 

There is also a new style of candlestick which incorporates various inputs (price, order flow, order book resistance, price positioning) into the price candlesticks - PROX Bars

 

PROX Bars may help traders see all this combined activity through simplistic color coding of the price bars.

[uexkuell 10]

There is also a new style of candlestick which incorporates various inputs (price, order flow, order book resistance, price positioning) into the price candlesticks - PROX Bars

 

Do you have a link please?

[FulcrumTrader 10]

I am not sure what trade platforms PROX Bars will initially be available for, but over time they may become available to some of the main platforms that most use. I am not sure what Kyle (trendscalping.com), the guy that has these new PROX Bars, is planning on doing to make these new style of price bars available in the beginning. I know he was in initial discussions with a few charting companies since he finished getting these PROX Bars set up. Kyle knows all about order flow (Delta) and order book resistance to the market driven order flow, so I like the idea of combining this info into a price bar.

[the_z 10]

THanks Fulcrum....looks awesome...while it it only a small snapshot...i see it surely has potential. It would be nice to have some PROX bars!

[FulcrumTrader 10]

I have seen the latest version which is ready to go and I do like the information provided all in just the price candlestick itself (I am used to looking at three separate panes for this info at present). Kyle the trader who will be bringing the PROX Bars out this month is a very simplistic minded person, who likes intraday trend following, so I think he has a good set up to work with. With all my background in Cumulative Delta based trading (over 8 years now) I was asked to test out the concept and I like the direction this is going. Between my feedback and other traders soon, doing some pre-launch testing, I think trendscalping will get a good feel for how to move forward with this idea.

[the_z 10]

Awesome...it looks great.....! :applaud: :cinema: :applaud:

[DionysusToast 10]

There seem to be a few myths about reading tape rearing their heads here.

 

I will be totally honest and say that I do have my own time & sales and it is a commercial product but I have no idea what the rules are here - so I won't mention which one it is.

 

Tape reading does not involve starting at Time & Sales all day waiting for a setup. If you are a scalper, you can do that. If not, you use the tape as a confirmation tool.

 

I don't use any indicators and I think attempts to turn the tape into an indicator are fundamentally flawed. You can either put the effort in to read tape or not. There are no shortcuts. I have been asked repeatedly to put my own Time & Sales products into an indicator form but you just dumb down the information.

 

The markets are a 4 way auction.

1 - Buyers @ market

2 - Sellers @ market

3 - Bidders

4 - Offers

 

The flaw with cumulative delta is that it only shows 1 & 2. Aggressiveness comes in different forms. It does come in the form of market orders but it does very often come in the form of limit orders. When you see the number of contracts to get through a level get higher and higher it often means a short term reversal is coming. This may happen across 5 or 6 ticks on the ES and on a cumulative delta chart you will simply not see the fact that delta is rising but price isn't. Let's say delta for the day is +50,000 - the 'thickening up' on the bid might occur over 6 ticks & 5000 contracts. It'll be millimetres of difference on the chart, something that will be barely noticeable.

 

Tape reading is about changes over time. Action has a reaction. You can see the action in the market buy & sell orders. When these orders have less impact on the market, you can surmise that the people with limit orders are starting to take more contracts on board which bodes well for a reversal.

 

If you pay too much attention to delta and no attention to what the bidders/offers are doing, then you are only doing half a job of tape reading.

[FulcrumTrader 10]

All 4 order book/order flow components should be watched.....exactly why I have stated I track Cumulative Delta and Cumulative Uptick/Downtick together. I want to see if the market order driven order flow is hitting resistance in the order book or not (how effective is the market order driven flow as it hits the book).

 

 

Price

----------

Delta

----------

Cum Up/Dn tick

 

 

(Mid Pane is price.....next lower pane is Delta......lowest pane is Cum Up/Dn tick) Images | ChartHub.com

 

Not until all THREE items are in alignment do you then have the best probabilities for linear movement of price!

[FulcrumTrader 10]

Or......if you use PROX Bars they already take into account all aspects of the order flow/order book data (market order driven order flow and limit order activity in the book).

[the_z 10]

Or......if you use PROX Bars they already take into account all aspects of the order flow/order book data (market order driven order flow and limit order activity in the book).

 

 

Fulcrum, Are you working WITH the guy (Kyle) with the PROX bars via the trendscalping.com thing?

 

I see your website now and to me it looks VERY similar if not the same...only he has PROX bars.

 

Further, how long would it take one to learn and profit from this new style do you thing?

Edited July 8, 2011 by the_z
website

[DionysusToast 10]

Or......if you use PROX Bars they already take into account all aspects of the order flow/order book data (market order driven order flow and limit order activity in the book).

 

ALL ASPECTS? Really?

 

You have boiled the ENTIRE art of tape reading into a single indicator?

 

I can believe that cumulative delta has been improved upon but to say that all aspects of tape reading have been boiled down into a single indicator is disappointing coming from you.

 

As an example - tracking large traders is a key element of using tape. Actual volume is not so much the key but which side the large trades are on is. So - you could see thousands of 1 lot sell market orders going through but also 5 or 6 1000 lot buy market orders at the same time. Retailers doing one thing, institutional traders doing another.

 

There's a lot of nuance in tape reading and you will lose a lot of it by dumbing it down into an indicator. Still - this does appeal to the lowest common denominator in trading and as such will sell like hot cakes.

 

You said it yourself "Why on earth would I want to start at a Time & Sales for hours?" - well, we'd all like the make $1000 in 5 minutes a day version of trading wouldn't we?

[FulcrumTrader 10]

The PROX Bars were a concept I have had for many months now but I never really worked on it as a focused project until recently. Kyle contacted me to see if I could get the PROX Bars built to tie in with his trend following set ups and approach (since he knows all the FulcrumTrader supply & demand event set ups and ways of tracking order flow). I spent several months working with programmers to get the PROX Bars built and functioning the way I wanted. Once they were ready, I told Kyle he could run with them for use with his trend following system.

 

I track levels of held inventory (open interest) and look for supply and demand events in what I do at FulcrumTrader. What Kyle will be doing with his TrendScalping.com is all geared towards more simplistic and at the moment trend following scalping. I do think paying attention to order flow is a critical component to determining probabilities for trade set ups. I have found in my experience that I know many order flow based traders who are profitable traders month to month, and I do not know very many price action only based traders who are profitable. I have been able to see tangible positive results with those traders that seem to stick with and pay attention to order flow activities within their trading.

 

Most of those who try and use Delta the way I do, seem to take about 20 to 30 days to grasp the various supply & demand event based set ups I use. What Kyle will be doing with the newly created PROX Bars, and his very simplified approach, should be easy to learn imo....maybe a few days. Keep in mind, what will be presented at TrendScalping is more focused on intraday scalping within trending moves......what I do has intraday and longer term based set ups (while tracking ongoing open interest of the futures instruments and the levels of held inventory).

Edited July 8, 2011 by FulcrumTrader

[daVinciLite 10]

ALL ASPECTS? Really?

 

As an example - tracking large traders is a key element of using tape. Actual volume is not so much the key but which side the large trades are on is. So - you could see thousands of 1 lot sell market orders going through but also 5 or 6 1000 lot buy market orders at the same time. Retailers doing one thing, institutional traders doing another.

 

 

I don’t know if you are trading any of the CME products, but if you are, what you think are market orders area really limit orders. The CME implemented these changes in late 2009. There is no way on tracking large market orders on any of the CME products that underwent any of the changes.

 

Is It Bots Or The Exchange Engine - PriceActionRoom's library

 

-dVL

[FulcrumTrader 10]

BTW, the algorithmic automated trade entry programs large liquidity participants use put orders into the market this way now...........

 

[ame=http://www.youtube.com/watch?v=cgpQBZF2sZQ]‪Phalanx (CIWS) Block 1B LPWS Testing and Firing‬‏ - YouTube[/ame]

 

 

They "spray" in liquidity (small lot "sequenced" trades) to MASK their entry into the market......up to 950 single lot entries in ONE SECOND capability.....woooo!

[FulcrumTrader 10]

....and for this reason I pay attention to the Cumulative Delta AND Cumulative Uptick/downtick (of trades....NOT of volume).

 

Both of these items are logic inputs to the PROX Bars....... [ame=http://www.youtube.com/watch?v=R3mBP6JVna8]‪PROX Bars Basic Intro (logic based price bars)‬‏ - YouTube[/ame]

[DionysusToast 10]

I don’t know if you are trading any of the CME products, but if you are, what you think are market orders area really limit orders. The CME implemented these changes in late 2009. There is no way on tracking large market orders on any of the CME products that underwent any of the changes.

 

Is It Bots Or The Exchange Engine - PriceActionRoom's library

 

-dVL

 

 

Well, actually there is - but I presume forum rules prevent me from :spam: pointing you in the direction of the product.

 

BTW - I'm the guy "Pete" mentioned at the start of that video :o