I will discuss some concepts on trading directly off the tape.
I will discuss some concepts on trading directly off the tape.
SuperTrader
Many a thanks . Looking forward.
"The best traders have no ego. You have to swallow your pride and get out of the losses." - Tom Baldwin
Tape Reading through T&S
When we talk about Tape reading there are primarily 2 sources of it; Time And Sales Level 1 Data where you see BidxAsk quotes and sizing and the Level 2 Order Book/Blended Order book which show the depth of the market. Ideally, Level 2 data is not required for Tape reading and is only used as a confirmation tool. Without Level 2 Data one can easily with some practice read the tape with simple T&S Level 1 data. The primary reason why traders cannot succeed reading the tape is because they lack the patience of trying to read the T&S window and often dismiss it as of no use. They look for immediate results rather than focusing on the process. Let me remind you here that T&S trading takes months if not years to grasp. It is simply because of the amount of information which comes out at such staggering pace. To begin understanding and reading it, one needs to adapt to the pace of information and be in the zone most of the time to read what dishes out of the tape. T&S is a "Visual Technique" to trade. This perhaps is the most important aspect of it.
Time and Sales window should contain the LTP, Volume, Bid, Ask, Bid Size, Ask Size. If someone does not have access to Time and Sales Window then you can simply use the normal NSE or Broker terminal and arrange these columns. In the standard NEST terminal this is available. No need for a special software for this. The more fancy software you will get, the more fancier your assumptions will be. So just stick to basics. I have posted what I usually have on my terminal.
What to look for in T&S Trading
There are at most 3 things you need to look while trading off T&S,
1. Color Changes and Trend
2. Size, Size changes and Size Trend
3. Fast Ticks and Impact of It
Color Changes and Trend
In the standard window, Green color is for prices going up and Red is for prices going down. During a market which is going up, you will spot many green color LTP which essentially is LTP at Ask. This strongly indicates Bulls being in charge. Similarly, in a market which is moving down, you will spot frequent Red color LTP which is the last price price being traded at Bid. This is a strong indication of Bears being in charge. In case where no major change happens, the color will be grey or white depending on the setting one has on the T&S window. What you need to look for is a sustained period of Color trend. This forms the first step of T&S reading. For every script the Color trend duration and implications will be different. The color concept is also easily visible through Footprint charts but since most traders do not have it, the normal color trends of T&S will suffice.
Rules:
Steady flow of Green along with White/Grey = Price is up and Trend is Bullish
Steady flow of Red along with White/Grey = Price is down and Trend is Bearish
Random flow of Red/Green along with White/Grey = Price is neutral and its better to Sit out.
Next post we will look into Size, Size changes and Size Trend.
Is this data available just like that ? Like NOW terminal or we need RT Data Feed for this ? SuperTrader
Trade the Moves, Not the Target.
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I am not a Research Analyst and not registered with any regulating authority. All posts are for educational purpose only