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What is tape reading?
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What is tape reading?

  #21 (permalink)
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Order Flow

For me modern tape reading is follow the Order Flow, like unsing cumulative delta, traking big volume orders, big volume accumulation at price, cluster volume and sometimes cluster delta.

Lubo.

Take your Pips, go out and Live.
Luke.
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  #22 (permalink)
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fiki View Post
Tape interpretation depends upon a consideration of the action of the volume. It is not price action, but volume – the amount of money, the supply and the demand – which best tells the story…"

From one of the best books on tape reading, Tape Reading and Market Tactics. Humphrey B. Neill first published 1931.

If you take this as tape reading though, I think you can make an argument that tape reading no longer really exists.
Fragmentation algorithms make the volume of a single print basically useless, especially with how deeply liquid markets are today vs 1931.
I would have cared very much so how big lots were being transacted in 1931. Today though its just not very in line with modern market mechanics and microstructure.
I've never gotten anything from tape reading books. There just isn't much to write about to even author a modern tape reading book.
Time would be much better spent in front of the tape, getting a feel for how series of transactions at the bid/ask are moving price around and totally ignoring volume.
In 1931 you would see:

100.00 - 40
today that trade on the tape would look like

100.00 - 1
100.00 - 1
100.00 - 1
100.00 - 1
100.00 - 2
100.00 - 1
100.00 - 2
100.00 - 1
100.01 - 1
100.01 - 2
100.01 - 1
100.01 - 1
100.01 - 1
100.01 - 1
100.02 - 1
100.02 - 1
100.02 - 1
100.02 - 1
100.02 - 1
ect...

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  #23 (permalink)
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tapereading is not just volume. the tape gives u 4 pieces of data: time, price, volume and the direction of the trade. all are important. i personally find price the least important factor and have no problem trading using just volume or even just time.

but you have to know what to look for. if you dont, you are just looking at noise.

the picture shows paris paintbar indicator highlighting the turns as size increase.

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  #24 (permalink)
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gcabrera View Post
Hi Sasha:

I read the book of Grady and found that reading the tape was very demanding, but actually gave me good clues on what the market pretended to do, based on big lots participants.

Fortunately, I found recently an indicator named biglots by integrity traders, that I mainly use for my trading. I have found that when price is divergent with the All Trades line of that indicator, it is a good place to enter a very low risk transaction if going with the trend, or a place to take profits if the divergence is against the trend.

I asked the programmer to develop another indicator that plots the big lots transactions on the screen so I see on the screen what is going on in the tape, just like Grady teaches.

That book is really no b.s. but now I donīt need to see the tape but for transactions above 50 lot in ES.

I am posting my charts daily in my blog here, if you want more examples. I have attached today chart as example.

Gerardo

Can you please define what you would like to see in the future indicator, and maybe tell us more about what is "bigLots" showing?

The reason I am asking is that it could be easier and faster to implement these ideas on MD.

And I half agree with you that we could use charting to certain extend to do what Grady is doing on the Dome. At least it seems to be a faster way. However, I realy wish to learn to trade like him and keep my Doms running hoping to pick something up sooner or later. Probably later thou...

Wanted to add, that the tapereading(as Grady) is still valid and will be for awhile. Algo's play their role, but not in every market to the same extend. E.g. if I traded YM I'd rather use Hubert's from TTM techniques that emphasize the speed of T&S over the size printed.
Also big lots move the markets not only for obvious reasons, but also because smaller guys pay attention to what they are doing and follow.


Last edited by Sasha; June 16th, 2010 at 06:30 PM.
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  #25 (permalink)
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This is of today

Sasha:

I am including today chart.

The indicator made for me is named BiglotsblockAlert and it actually plots dots on the chart with the quantity of contracts traded. It plays sounds and prints in the alert window too. I configured it to print pink dots for sell orders and green for buy ones, when lots go above 275. The ones darker show that way because they are above 400 contracts. With that indicator I donīt have to see the tape, just keep track of orders above 50 lot to see how medium traders are doing.

The indicator biglots that is in the second panel, has two lines, the green-red line shows the accumulation of all orders of any size... thus named All Trades Lines (AT). I use that line to look for divergences and if confirmed with big orders in the direction of the divergence, I wait for price to hit me. Sometimes I donīt need big orders to appear but just to see that divergence is forming when price is approaching a previous swing high, low, or an important level like Yesterday High, low, close, etc. or a pivot.

The other line in BigLots is the accumulation of orders above certain threshold, that I set to 50 lots. It also plots dots on the line, showing that big lots orders accumulated big quantities there.

Today I followed advise of Grady, I entered long after divergence up just one tick above
today open, and just after a big buying order of 452 contracts. Price did not moved as expected, so I scratched it.

You can see that even though price was falling, big orders buying were appearing between 8:23 and 8:40... they were faking the trend followers shorts and trapping them.

Another trap was at 8:02, last order of 300 in the rally, just to move price up a little bit and encounter a big selling order of 320... could this be the same guy? You read the book, you know what I mean. And notice divergence to the downside at that time.

One more thing, biglots indicator also shows a square with the total bid and ask and the ratio within them, and it changes colors when the ratio goes above certain levels, so I donīt have to see the DOM all the time.

I also have a chart of 37 ticks of YM that plots dots when there are orders above 20 lot. Sometimes when ES is not plotting big lots, YM is and gives me clues on where the price on ES may head. And sometimes both plot big lots orders at the same time, confirming interest in the same direction.

For me everything is there, you can ask for a trial if you want.

Take care

Gerardo

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  #26 (permalink)
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Thanks, I would certainly like to try it. It will be interesting to see it in motion and compare with the DOM.
The only thing that seems to be missing is that you can not see the pulled orders, or am I wrong?

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  #27 (permalink)
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You are right, there is no way to see those pulled orders, but you see them in the DOM sometimes. I actually pay more attention at what people is doing but

I attach today chart with my early trade, where I played divergence at the bottom and then a 500 contract bomb buying came to open my way to the upside, for a quick winner.

Take care.

Gerardo

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  #28 (permalink)
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Thanks, you've mentioned a trial. Is it possible, I am using NT7...
And I have questions certainly, what is the small triangles at the zero line?
Why not add a "pulled orders" dot or number and make the indicator perfect for scalping? That shouldn't be too hard to do:
No need to go too far on the DOM --2 levels should do it, and just filter out by size the difference between printed and changed on DOM orders...

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  #29 (permalink)
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The trial is for 6.5 or 7.0, I am using 7.0 too.

The small triangles on the cero line show when biglots line and all trades lines are pointing up and a big lot is drawn in the biglots line. kind of alignment of conditions. It shows light green if the dot is medium dot and darkgreen if the dot is big, meaning more big buyers (for green) entered at that moment.

I donīt know about showing the pulled orders, since the lines in the indicator are based on times and sales orders. The DOM box can be arranged to sum up the number of levels that you want, maximum 5, so maybe configuring those to 2 levels, you could see how suddenly you have a lot of sellers in the ask and if they pull their orders very quick, I guess. Since DOM ratio of bid/ask can be configured to show different colors at different ratios, if you suddenly have a ratio of 2 with one color and just one second afterwards you have a ratio of -.5 for example, it will show the change of colors. Showing the pulling, I guess. There are many ways to configure the indicator.

After I placed my trade there were a lot of buyers prior to faking sellers at the bottom and then price reversed and went up very strong, as I show in the attached chart that I marked after the market closed.

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  #30 (permalink)
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How can I try it?

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