Typically, when stocks breakout through support or resistance levels, not only will the size of the orders go higher but you will see the tape start to speed up. The speed of the orders is another key component to the message that the tape is giving you. I stay away from these setups as the message of the tape is not as clear, and this lowers my odds of a winning trade. Many times, I will see great technical setups in stocks that trade low volume. There is no hard and fast rule about this it is more of a visual cue that your eye gets trained to recognize. When putting on a trade, you typically want to see a flurry of buy or sell orders which have greater than 300 to 400 shares in size. The size of the orders coming through will help you decide if there is conviction behind the price action you are seeing. I want to discuss a few of these key changes that you should take note of: Size of Orders Reading the tape requires you to train your eyes to scan for changes in character. It is wise to review the way in which the “tape” trades for a couple of minutes before entering a trade. Remember, every stock is a different story and tends to trade differently. Tape reading can be very fast and confusing at times and requires quite a bit of practice to get used to understanding the true meaning behind what you are seeing. You need to be aware of support and resistance levels and also combine the message of the tape with price pattern formations. You cannot go out and buy or short a stock because you see the tape speeding up a bit. Trading with the tape requires trading with patience. Your job as a trader is to put trades on with the highest odds of winning. While some professional traders may not like to admit it, trading stocks is an odds game. It does so because your goal with tape reading is to follow the money. Tape reading involves both and if used correctly, dramatically increases the odds of your trading working out. I am a very big believer that there are two truths in trading stocks. Depending on the trading platform, you will have other data points available to you.Īfter mastering the message of the tape, you will be able to accurately decide when to enter and exit a trade. The time and sales window provide details on each of the trades that have gone through for that security, such as Time of Trade, Price, Size of order, and condition of order. the “ Tape.” The time and sales window shows the detailed trader information regarding the order flow for a particular security. Does the tape work better during specific times of the day?įrom my experience in day trading over the last few years, my most valuable tool became the time and sales window, aka.Once you are ready to start practicing using the tape, you are going to need to log some quality hours with our trading simulator to hone the skill of reading the tape. In each of the aforementioned articles, you will see how the tape provides validation to the price action, which will prevent the dreaded scenario we’ve all faced of being caught in the “ trap.” Lastly, regarding tape reading, it truly requires the “gift of touch.” For those unfamiliar with this term, it means you do or use something so much you begin to gain a sixth sense of when things are about to happen. Once you have given this a thorough read, I highly advise you review the following related articles: (1) Psychological Support and Resistance Levels, (2) Day Trading Time Zones, and (3) Day Trading Breakouts. The tape is most important when validating breakouts and supply versus demand at critical price points. In this article, we will cover the basics of the time and sales window and tape reading (speed of the tape, size of orders, etc.). This goes beyond how a stock trades, but how a stock is trading on a given day and at a given price level (e.g., 10, 25, 100).
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