Volume tape trading
By Alan Farley Updated Jun 25, Tape readers have an advantage over chartists because they can interpret intraday data in real time, filtering pages of numbers into surprisingly accurate predictions of short-term price movement.
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This near-legendary market skill has additional volume tape trading, allowing proponents to measure the emotional intensity of volume tape trading while they uncover the day's leaders and laggards.
The basics of tape reading can be learned in a few minutes, but the practice takes a lifetime to master, for three reasons. First, the market is enormously complex, requiring many years of observation to understand how individual parts affect the whole.
Second, macro forces that move world markets change over time, with quantitative easing controlling one cycle, while a housing bubble keeps markets afloat in another cycle.
Reading The Tape! 📜 (Day Trading Must!)
Third, and most importantly, the market structure has changed dramatically over the years, forcing tape readers to continuously learn new skill sets.
This practice made money in the first few years because it read supply and demand accurately, showing the standing orders of big players as well as which market makers volume tape trading in control of the security's direction in that session.
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In turn, those instruments have taken on enormous power, moving thousands of securities at a time. Tape readers have adapted well to this electronic environment and now watch a broader array of market inputs than at any time in history.
Heard enough and want to become a skilled tape reader? Here are some tips and techniques to help you get started. Pre-Market Preparation Start in the pre-market session, looking at the overnight index futures.
Treasury bond futures. Consider the impact of the projected open and how gaps will impact trader psychology.
Big gaps have become more common in recent years due to the rise in hour trading, and playing them well requires careful strategies. Get ready by estimating how opening prints will interact with overnight levels. The relationship between price swings and those levels presents the first tell of the day, with bulls in control above opening prints and bears in control beneath.
Mark out the first 5- or minute trading ranges, looking for small sideways patterns that could yield breakouts or breakdowns later in the session. Now, take your first look at the relative strength and weakness, pulling up a list of the most liquid ETF for each major sector.
Sort the list by percentage change, exposing the strongest and weakest funds in the first hour. This may also identify rotational strategies that persist for several advantages of binary options entire session.
These four data sets yield immensely useful tells on short-term capital flows. The advance-minus-decline variation also carves predictive intraday patterns, often ahead of price, as you can see above when the indicator reversed sharply after a strong January open. This reversal led to a nasty decline that dropped major indices deeply into the red. Now look at VIXrecording observations about the morning tape.
First, is it flashing red or green after the first hour, and is that number trending higher or lower? Rising VIX signals conflict or fear that favors lower prices, while dropping VIX reveals a speculative appetite that supports higher prices.
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- Yet, the contemporaneous data you get from your Internet or other data provider may not reflect just what happened on any given day.
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Second, track divergences between VIX and index action because they often resolve with capitulative behavior that forces the indicator or index to reverse and follow.
Midday Messages Track first-hour themes into the lunch hour, watching opening prints and market internals.
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Be especially vigilant when indices push well beyond prior closing prints and then reverse gears, pushing back in the other direction.
Market tells become primary leading indicators at these inflection pointsoften breaking out or reversing ahead of price.
These can be used to build or add to intraday positions, or as exit signals, allowing you to take profits or losses ahead of the crowd that gets trapped by sudden changes in the market tone.
Pay special attention between a.
Share Tweet Google Linkedin Reddit Reading the tape is one of the essential indicators when active trading. Many traders know about the hundreds of indicators readily available on most trading platforms, but very few have an idea of how to read and interpret the tape.
With other world markets closed, U. This second wave may require a rework of morning strategies that includes exiting early positions to avoid getting targeted by contrary price action. Reading the Final Hour Expect persistent intraday themes to reach their climax in the last hour, especially in the last 15 minutes.
Index prices can surge much higher and lower during this period, with institutional capital coming off the sidelines, while algorithms work hard to shake out traders wanting to hold overnight positions. Market internals become your best friends at these critical junctures because they tell you what to expect into the closing bell.
Numbers that expand or contract throughout the session predict that volume tape trading strategies will fail, while mediocre numbers suggest a mixed close, with neither bulls nor bears happy about the outcome. The Bottom Line Tape readers interpret complex background data during the market day to gain a definable trading edge over the competition. Through experience and skill, they react to environmental changes well before price movement awakens the sleeping crowd.