It's the oldest and purest method to trade.
It's not based on fancy indicators or on any kind of oscillators but it's purely based on executed orders into a determinated market.
Livermore, Wykoff, Neil and others have been the precursors of this style of trading but the ages are changed...
The way to trade has changed, the way exchanges transmit datas has changed, the contracts have changed, everything has changed but the assumption "The Tape Never Lies" is and will always be a fundament.
The Tape came back into the second half of 1800 with the advent of the TICKER TAPE MACHINE, a modified telegraph machine that printed stocks' symbols with price and volume of the last trade.
Traders watched at the tape all day long and made their trading decisions only based on what they could see on it, no charts no indicators, no magic autotrading.
Luckily today the technology helps us really a lot!
The direct descendant of the ticker tape machine is the traditional Time and Sales window you can find in any platform, where you can read each trades TIME,PRICE,VOLUME
The Evolution of the Ticker Tape Machine is represented by all the platforms that allows us to see all the prints coming at market, like the Market Delta, Gomi's add on for NinjaTrader, the add ons for Multicharts or Tradestation.
As you can see on the Market Delta chart here above, with this tool we are able to look inside the bars and really know who is trading and where!
The primary goal to trade this way is to follow the large players...
This does NOT mean follow the large prints because Exchanges have modified the way to transmit data; today we see on the tape how players are executed not the amount of their trades. To make this short we could say that if a player buys 100 lots at market, we'll see maybe a succession of smaller lots executed BUT we can figure out he is a large player we want to follow because all these prints are executed in the same second. As already told, reading the tape can give us the opportunity to anticipate the upcoming movement and the ability to make quick profit or small losses. Being able to read the tape can increase a lot our risk reward ratio and can give us the ability to manage a trade in real time, knowing when to hold or to fold a position.
This method is not a fast track to the million dollar trade... It requires a lot of study and the right tools.
Who comes for the first time to read the tape should focus on a pattern per time.
Primarily he should track only one side; i mean, open a time and sale window and start watching at only the buyers or sellers activity. You can do that when the price is forming the setup you use to enter the market; if you are going to enter long try to find out what buyers are making at market, are they aggresively buying? Are they flat? No buyers interest at these prices? How much large are the trades? How many lots does it need to move through the next uptick? How about the delta day?
You will see that after some time you will be able to feel the market activity simply looking at your dom and at your time and sale window!
If you look at Cruel Trading StockTwits page you can find some charts with the explanation of the patterns I most trade, and on Twitter my commentary during the day.
If you are interested in tape reading and in order flow trading please feel free to contact us!
