Learning tape reading

[TAjammy]

So i wanted to find a deeper way of looking at the market, not just trading bounces of support/resistancem something more deep, more pure. Something that would take a lot of time but in the looong run make me a far better trader.

I tried mechanical, indicator based systems, they kinda worked but i lacked consistency from them after a good 3 months of trying them. I tried naked trading, and i wasn't half bad at it, but it didn't match my personailty, trading pin bars or whatever off H4 and the dailies was too long for me, i am too young, too impatient so i went back to a style of trading that i previously attempted with lagging indicators-scalping.

I heard about jesse livermore-the greatest trader of all time perhaps, he based his trading of the tape. I figured im young so i can afford to watch the time and sales (tape) for 2 or 3 years on the YM using 89,150 and 233 tick charts. (the good thing about tick charts is that when the market is slow, illiquid and dull , less opportunities will present themselvesm rather than trading of a 2 minute chart. I heard somewhere that those in the pits don't care about 2 mintute highs or lows, they care about how fast the orders are flying in, who is buying them and at what volume and price.

So i heard from several traders that the best option for me would be to start tape reading the time and sales window, ' how can i trade of that?!?!!' answer-'it helps you understand the market you are trading in, the players, whenever i see 1000 sell orders ON DOM or tape hitting a 61.8% fibo level and price goes down i know to short the market'.

So i looked around for where i could get my hands on this time and sales window, it seemed i would have to pay arounf $55 a month, this was for other vital indicators like $tick aswell.

I was just about to suck up the cost for 6-7 months of this service when i seen i had downloaded ninjatrader from a while back. I found out with great surprise i could see real time data for what i wanted to trade later on (YM) for free! i could get access to tick charts, time and sales and real time data all for free. It took a bit of messing about to get it all configured but it got all sorted and yesterday i began tape reading.

At first i just looked at the price, this was actually on the ES , it was just goingfrom .50,.75 and so on, i hadn't a clue. I started looking at the volume of the tradess and then started to get a feel for what was goign on. The overnight session on ES was so slow , but it meant i could read the tape, buy orders in big volume - around 40+ were flying in (there had been nothing above 40 the whole time, just 1s and 2s) but price wasn't budging to the upside...hmmm, and when even just 3 or 4 sells came through price would shoot down. it was almost as if the sell orders would just squeeze through and then price would pop. So i took a short and it went well .

thats all i've learnt so far but this s*** is going to take years to master!

i'll be posting my thoughts on what i think i have found out etc.

 

[TAjammy]

uh oh, wrong forum, can a mod move this to journals?

 

[Technically Fundamental]

whered you get real time sh*t off of ninjatrader?

 

[TAjammy]

lol, opened an account with mirus ...so i ge a month trial free every time. free DOM, T&s, charting.

when it expires i can just sign up with a different email

 

[cr6196]

yep is actually pretty good, you can get ftse, eurostoxx 50, short sterling, eurodollar, currency futures, commods, bund, 30yr, 10yr, full DOM & T&S for all of them, some of them don't have historical charting tho...just found that out yesterday lol

i would add that tho that DOM is less than helpful and often when you see a big order price will head towards it and cos you can remove orders it doesn't really tell you much...i've found printing off historical charts and going through them has helped me learn most. Oh and taking notes during the day.

 

[rawrschach]

whenever i see 1000 sell orders ON DOM or tape hitting a 61.8% fibo level and price goes down i know to short the market'.

good luck with that =D

iirc 'the day trader's bible' is mostly about reading the tape

 

[dcraig1]

I've posted this type of chart a couple of times before, and it tells a lot of the story for stock index futures. It is the DAX, current session, constant volume bars of 250 contracts each.

Bottom plot shows the ratio of contracts at ask in book to total contracts in book - all levels and smoothed.. Second from bottom plot is smoothed (8 EMA) difference of contracts traded at ask minus contracts traded at bid.

I don't know what you expect to see in T&S or price ladder that cannot be charted and digested far more easily.

For the curious, the blue bands on the price chart are the developing MP lower and upper bounds of the value area. Horizontal blue line is yesterdays MP upper value area. Black line is VWAP.

 

[TAjammy]

I've posted this type of chart a couple of times before, and it tells a lot of the story for stock index futures. It is the DAX, current session, constant volume bars of 250 contracts each.

Bottom plot shows the ratio of contracts at ask in book to total contracts in book - all levels and smoothed.. Second from bottom plot is smoothed (8 EMA) difference of contracts traded at ask minus contracts traded at bid.

I don't know what you expect to see in T&S or price ladder that cannot be charted and digested far more easily.

For the curious, the blue bands on the price chart are the developing MP lower and upper bounds of the value area. Horizontal blue line is yesterdays MP upper value area. Black line is VWAP.

VWAP and market profile are good, but i don't see why you have that ratio indicator. You can't see the speed of the tape with that, you can't see a buy or sell order coming up on DOM .


By the way i don't think DOM is that great, it's just that whenever price is at good levels that you should take notice of any big blocks coming through- it's usually hedge funds buying or selling off of pivot points, so when you can see a sell program coming through at R1 you can have a nice trade on your hands by placing a limit order just above or below the buy or sell program.

 

[Technically Fundamental]

Someone's been reading Carter

 

[TAjammy]

yep sure have. he doesn't tape read though, nor is he a scalper. Been trying some of his indicators out on forex and they aren't bad.
Probably the only good trading book out there, explains pivot points very well and was the first place i learnt about $tick and $trin. It's a shame i can't find any live $tick anywhere for free lol.

 

[TAjammy]

damn why does ninjatrader have to be so messed up, sometimes i can log in sometimes i can't

 

[Technically Fundamental]

It's a shame i can't find any live $tick anywhere for free lol.

 

[mrsoul]

So i wanted to find a deeper way of looking at the market, not just trading bounces of support/resistancem something more deep, more pure. Something that would take a lot of time but in the looong run make me a far better trader.

I tried mechanical, indicator based systems, they kinda worked but i lacked consistency from them after a good 3 months of trying them. I tried naked trading, and i wasn't half bad at it, but it didn't match my personailty, trading pin bars or whatever off H4 and the dailies was too long for me, i am too young, too impatient so i went back to a style of trading that i previously attempted with lagging indicators-scalping.

I heard about jesse livermore-the greatest trader of all time perhaps, he based his trading of the tape. I figured im young so i can afford to watch the time and sales (tape) for 2 or 3 years on the YM using 89,150 and 233 tick charts. (the good thing about tick charts is that when the market is slow, illiquid and dull , less opportunities will present themselvesm rather than trading of a 2 minute chart. I heard somewhere that those in the pits don't care about 2 mintute highs or lows, they care about how fast the orders are flying in, who is buying them and at what volume and price.

So i heard from several traders that the best option for me would be to start tape reading the time and sales window, ' how can i trade of that?!?!!' answer-'it helps you understand the market you are trading in, the players, whenever i see 1000 sell orders ON DOM or tape hitting a 61.8% fibo level and price goes down i know to short the market'.

So i looked around for where i could get my hands on this time and sales window, it seemed i would have to pay arounf $55 a month, this was for other vital indicators like $tick aswell.

I was just about to suck up the cost for 6-7 months of this service when i seen i had downloaded ninjatrader from a while back. I found out with great surprise i could see real time data for what i wanted to trade later on (YM) for free! i could get access to tick charts, time and sales and real time data all for free. It took a bit of messing about to get it all configured but it got all sorted and yesterday i began tape reading.

At first i just looked at the price, this was actually on the ES , it was just goingfrom .50,.75 and so on, i hadn't a clue. I started looking at the volume of the tradess and then started to get a feel for what was goign on. The overnight session on ES was so slow , but it meant i could read the tape, buy orders in big volume - around 40+ were flying in (there had been nothing above 40 the whole time, just 1s and 2s) but price wasn't budging to the upside...hmmm, and when even just 3 or 4 sells came through price would shoot down. it was almost as if the sell orders would just squeeze through and then price would pop. So i took a short and it went well .

thats all i've learnt so far but this s*** is going to take years to master!

i'll be posting my thoughts on what i think i have found out etc.

Tape reading is basically a way to get a market feel based on observing changes in the prices.
You need to watch the bid and the ask and, after years of experience, you can get a feel on the market.

I have been trading this way for many years.
Sometimes by just watching the bid and the ask, combined with chart work and a knowledge of fundamentals, you can literally FEEL when supply or demand is coming into the market.

Some of the best trades I have ever made have been with this type of market feel that comes from adept tape reading.

Basically, it's getting a feel for the market, combining it with findamentals and technicals, and then placing your trade.

You can become very succesful tape reading if you combine it with fundamentals and technicals but it takes years of diligent market observation.
This skill is well worth developing.

 

[cuotes]

when it expires i can just sign up with a different email

You mentioned mr Livermore earlier, right?
Do you imagine to Uncle Jesse doing such a thing? :whistling

 

[rawrschach]

uncle jesse wasn't trading on sim

 

[TAjammy]

im not really 'trading' at all on sim, just reading the tape. Making money on sim will never make me feel good

 

[mb325]

lulz

 

[virtuos0]

So i wanted to find a deeper way of looking at the market, not just trading bounces of support/resistancem something more deep, more pure. Something that would take a lot of time but in the looong run make me a far better trader.

More pure? More deep? You do realise you sound like a nonce don't you? Tape reading won't help you speak to the angels, I hope you realise that.

Anyway, I admire you for bothering to look into this, your effort will pay off. Unless you're just **** at trading, then no amount of tape reading is going to help you.

Good luck!

 

[dcraig1]

VWAP and market profile are good, but i don't see why you have that ratio indicator. You can't see the speed of the tape with that, you can't see a buy or sell order coming up on DOM .


By the way i don't think DOM is that great, it's just that whenever price is at good levels that you should take notice of any big blocks coming through- it's usually hedge funds buying or selling off of pivot points, so when you can see a sell program coming through at R1 you can have a nice trade on your hands by placing a limit order just above or below the buy or sell program.

You can think about a futures market as having TWO supply and demand pairs - demand for longs/supply of longs and demand for shorts/supply of shorts. For example contracts visible in the book on the ask represent the supply of longs and and trades executing at the ask represent the demand for longs. Alternatively traders who place non marketable limit orders are sometimes called passive traders (they let the price come to them) and traders who place marketable orders are called aggressive traders because they want in immediately.

It is this interplay of supply and demand that determines price. I presented a graphical illustration of that. The great advantage of graphical presentation is that you can see how things are developing over time.

IMHO most of the stuff I've read on the net about reading the DOM is a waste of time. As are are the comments about faking.

A final comment, it is a mistake to attribute aspects of market behaviour to things like "its the hedge funds buying at a pivot point" because you don't know that, I don't know that and the guru down the road just says that sort of thing to make themself sound knowledgeable. Stick to the facts and only the facts.

 

[TAjammy]

You can think about a futures market as having TWO supply and demand pairs - demand for longs/supply of longs and demand for shorts/supply of shorts. For example contracts visible in the book on the ask represent the supply of longs and and trades executing at the ask represent the demand for longs. Alternatively traders who place non marketable limit orders are sometimes called passive traders (they let the price come to them) and traders who place marketable orders are called aggressive traders because they want in immediately.

It is this interplay of supply and demand that determines price. I presented a graphical illustration of that. The great advantage of graphical presentation is that you can see how things are developing over time.

IMHO most of the stuff I've read on the net about reading the DOM is a waste of time. As are are the comments about faking.

A final comment, it is a mistake to attribute aspects of market behaviour to things like "its the hedge funds buying at a pivot point" because you don't know that, I don't know that and the guru down the road just says that sort of thing to make themself sound knowledgeable. Stick to the facts and only the facts.

the 'facts' are that hedge funds do in fact do buy or sell programs off pivot points, you can't deny it. You can't do well reading DOM , you can do well reading tme and sales- for example the pivot point is at 1000, you see on the DOM a sell order for 5000 contracts at 1000.50, in this example you would place a limit sell at 1000.25, so that when you get filled price will more than likely shoot back down because of all the sell orders, after that move take profits-this is what i mean for scalping.