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Tape Reading

The term "tape" came about back in the 1870's with the invention of the ticker tape machine. It was basically a modified telegraph machine; the difference was that you didn't listen to the dots and dashes clicked on the telegraph. Instead, it printed a brief symbol of a stock followed by the price and volume of the last trade - this rolled out on a paper tape. It provided a huge increase of speed in transmitting trade information to the various banks across the country.

How was it used? Traders would stand around and read the tape - or actual executions - coming out of the machine and make decisions on whether to buy or sell. If they wanted a chart, they drew it by hand based on the closing price at the end of the day.

Fast forward 140 years and we now know the "tape" as the electronic Time and Sales window on our charting platforms, such as the one shown at left. When it is set up correctly, it conveys information that can be used to fine tune entries to a very precise level.

There is an old saying - you've probably heard it - 'the tape never lies'. That is a profound truth, which is what makes learning to read the tape so valuable.

Using a tick chart is not reading tape, even if you set it to one tick - it's using a tick chart. It doesn't display information in the same way. Your platform cannot draw the movement of a bar or candle in such a way that it clearly conveys the same information as a Time and Sales (T & S) window.

Really, the same goes for watching price move up and down your DOM or watching the Bid/Ask change on your Level 2 - it can be effective but it's not reading tape because it's not accurately representing actual sales and volume.

Source: http://www.priceactionroom.com/Tape_Reading_X164.html

An old investing technique used by day traders to analyze the price and volume of a particular stock in order to execute profitable trades. Tape reading involves evaluating the size of stock orders, order speed, order price, and order condition (at ask, at bid, between ask and bid) to identify trends in trading behavior by insiders, professionals and the general public. These trends help a trader recognize good times to buy or sell.

Read more: Tape Reading Definition | Investopedia http://www.investopedia.com/terms/t/...#ixzz4EvkweE3d

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Created by  steve2222 , July 20th, 2016 at 03:11 AM
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