Trading is not about knowing. Trading is about acting on situations, patterns, and signals that you are familiar with. This all comes from experience, proper training, and something that you and I call intuition. Intuition is required for reading the tape.
Reading the tape is basically studying pure and magnified price action. Long ago, traders used to study the ticker tape to assess price action, the volume, momentum, and other signals long before the internet was born. You must have this skill to refine and perfect your entries and exits. Since most people already know a lot about technical analysis, I wanted to cover the next evolution in your development.
Most of you know that I keep things simple and focus exclusively on price action, volume, moving averages, trends, and other simple signals. If you master price action, then you will be able to tell whether a stock is strong or weak prior to breakouts, one of my most favorite and practiced strategies. You’ll be ahead of the pack of technical traders that don’t know how to read the tape. Instead of going into Level 2 or the bid/ask, I will integrate the tape with charts as I am most proficient in this area.
Learning to trade requires two things. The first was mention in the second sentence of this article. The other is creating the perfect mindset that can handle unusual and uncertain liquid trading environments. This isn’t something that can be taught from a textbook or in a school. It must be practiced over and over again. A teacher must demonstrate what has to be done and I will be that teacher. In addition, I expect you as the student to work on the personal experience that’s necessary. Luckily, that’s developed over time.
I chose “art” for tape reading because that’s what it is. It’s not a science. The physicist Yakov Zeldovich once said, “Science has one answer where art has many.” Tape reading requires an open mind. It is also interpreted differently among traders, therefore I consider it an art. You are the artist and the trade is your artwork. A big side of trading where art plays a big role is when you adapt when the market changes it’s tune. You must adjust or face indefinite loss.
The biggest benefit of tape reading for me is how it defines my entries and exits. Most of you have been following me for months, perhaps even a year and a half when I first started blogging. You already know what I do, and you know my trades already. My job is to read stock price action correctly and then viciously attack each trade. You may have witnessed me attacking the same stock over and over again in a single day. This is possible because of the synergy that technicals, charts, and reading the tape produce.
All of this leads to the “edge”. Do you have it? I can tell you that my personally trained army of traders do and demonstrate it on a daily basis. They are confident in their actions. They are consistent with their results and their emotions. Our plays are easily distinguishable and we have our own style. We know exactly what to do with each setup. There is no hesitation to attack. How do they do it? It’s their edge and reading the tape is a huge component of it. There’s only one way to develop an edge and reading the tape and it’s through experience.
The highest possible level a trader can reach is intuitive trading. As we continue to trade, we reach critical mass that profoundly results in second nature reactions. This is your ultimate goal in developing as a trader.
The next article in this series will explain the tape in detail. We’ll talk about various emotional attributes to the tape such as capitulation or euphoria, as well as accumulation and distribution,trend continuations, select high-probability setups, and many other things in future articles.
———————————————————-
If you haven’t done so already, vote for me in the ShortyAwards in Finance. It only takes a minute and I’ll appreciate it greatly. For those that already voted, thank you so much.
http://shortyawards.com/WeeklyTA
VOTE!
——-
For expert tape reading, I highly encourage you to refer to Vadym Graifer of RealityTrader.com. I spoke with him personally and he’s an intelligent and great guy.
Here is his bio:
Vadym is the author of Techniques of Tape Reading (McGraw Hill 2003), How to Scalp Any Market (2005) and Master Profit Plan (2005). Vadym is a frequent featured speaker at International Trader’s Expos and Financial Forum Conferences.
He is the founder of RealityTrader.com, a hands-on training company, working with a global community of individuals to achieve high levels of trading success.
Vad is a professional trader and an international private trading mentor responsible for turning around the trading careers of thousands of trader. He has also published articles and interviews in industry magazines, corporate product newsletters and trading forums.
For more background information on Vad, please see excerpts from Vad’s book (Chapter 1, Chapter 2)
If you enjoy the content at iBankCoin, please follow us on Twitter
Been looking forward to this for awhile. Thanks
ur welcome
yea dude, thanks so very much for bringing us in and being so open with us. Helping us learn. I have become much more aggressive in my trading, not intraday, I still cant figure out the intraday, I dont think I ever will. I am primarily a swing trader, but I have applied some of the ways you trade to my trading and it helps alot.
Last year around this time you did a series of articles that helped me out a TON. Like the Death Spiral article. I look forward to this years series of articles.
Hey if you dont mind, Ive read all your articles, if you could put a couple more minutes into how you intraday trade. For me, I usually look for intraday trades in the morning, if nothing comes up(which is always the case) then I dont bother. In the afternoon I prepare to figure out what I should swing trade.
ttyl
Pete,
Look through the archives for CA’s trade reviews he has been posting. The trades are intraday with entry and exit points and volume signals noted on the chart.
I posted 3 main intraday setups somewhere. I also presented it on one of my stocktwits tv shows. dig around
Two words – fuck yes.
i still have to setup a time for your school. email me on whats avail.
Awesome, thanks a bunch CA. I’m very much looking forward to this series. 95% of my technical trading I learned from you last year (loved your 7 patterns and use them all the time). You rock!!
great. thanks and share some ideas once in a while
I’d be happy to post my trades, but I only swing trade, and only off the TSX. Not sure if that’ll be of any benefit to anyone…
That being said, here’s my watchlist:
WJA.TO, GIL.TO, TKO.TO, CNH.TO, R.V.
I bought AXL.TO at $1.36 this morning.
Hey Buzzkill,….really interesting picks,…I’m also picking at the TSX.
We should chat up,…love to share some ideas/info.
thx.
anytime
I guess I’ll start posting more picks then!
Great stuff, CA, thanks! Also enjoyed the TB interview.
Hey, would you consider using your influence to convince the powers that be to provide a “printable” feature for IBC articles/posts? I’ve e-mailed requests to IBC/Fly for this before, but haven’t gotten any response.
The reason I ask is that you guys always put out terrific content like this, and I believe many of us like to print out hardcopies for reading elsewhere, and to save for future re-reading and reference. In the absence of a “Print Version,” the printouts currently come out poorly formatted, with extraneous text like the ads, etc. Usable, but not nice and clean, cumbersome to print out at the right text size, wastes paper, etc. (Unless I’m doing something wrong on my end… ?)
Thanks again.
you mean like downloadable PDFs? Those are easy. I’ll see what I can do.
a sharp tape 100 yrs ago used this pure form of TA to game the system. It actually seemed a blessing no CNBC et al MSM spin vehicles existed but only one source of information being tips which to the wary could only be assumed intentionally distorted fro obvious reasons liquidity was light in those days with only a handful of big whales capable of pushing prices around
So investors paid young boys for any tip they may have over heard from anyone with ties to big money regardless if source was straight from JPMorgan or JOE kennedy’s shoe shine boy
so once the savvy investor gets a buy rumor his sends the boy to place a sell order at the trading window whereupon he confronts the old man to be sure he heard him correctly
now sometime later he sends the boy back to purchase x amount of shares and pays him well for the tip
that was the best course in pure TA I ever read because it never stated exactly how the old man operated you had to research yourself or just think long enough and common sense will kick in
the old man used the tape to validate the rumor- once he was convinced his sell order for 1000 shares was taken on an uptick or we would read it on the ask price he then felt confident big money was accumulating stock in fact
what made these people more advanced traders than most anyone today I think were two things:
1) they assumed all information corrupted intentionally which developed this gaming intuition
2) the nature of the limited data of the tape maintained their focus deeper into the market internals mentally in their minds as charts were not practical thus they learned the intuition factor much sooner as the tape was the best and only education needed same as today
great info. thanks
^from rem. of a stock operator.
Thanks very much CA, want to learn more about the tape.
I like the 400tick charts of futures to see trading velocity, this has been useful.
ur welcome frog
Great piece,…excellent for a newbie like me.
I also listened to your interview,…using your suggestion,…I’m beginning to take in at least 1 book a month,…hoping to increase this by 2-3 a month.
Thanks for being out there to teach.
————————————————————————————————————
anybody read ” RICHARD D. WYKOFF – MY SECRETS OF DAY TRADING IN STOCKS”
great book on tape reading/day trading.
find it here http://www.tradingfives.com/wyckoff/chapter1.htm
keep reading those books
This is great. I can’t wait for the next article. You could not be more accurate in your statement regarding practice & intuition.
Would you suggest paper trading to gain this practice & intuition before jumping in with the big guys?
Thanks!
Paper trading is ESSENTIAL. If you can’t control yourself risking fake money, you have no chance with real money. Looking forward to the primer, CA.
that’s a bit different because paper trading won’t truly give you that. It’s gotta be practiced in real-time with real money, but doing it with small sizes ensures that you don’t run into problems.
CA
Based on the chart of the S&P, what do you think the market is doing? IMO, if we hold this ~1130 area, we’re topping out… what do you think?
still in an uptrend. I don’t see indications of topping yet.
sweet… i think if we hold 1142 tomorrow will open with a spike
AA
Loved the piece. It was put together real well and im defiantly looking for the other installments.
Do you use the PPT to screen for stocks at all?
no. I use it occasionally to find specific subsector components
Bought $SEED 14.05
Sold $SEED 14.04
Good Stuff CA!
Question: I have a set of rigid rules I trade with. I was in a trade yesterday and didn’t like the price action. My gut told me to get out, but my rules told me to stay in. I decided to follow my rules(stay disciplined) and held the position, which ended up with me taking in a small loss. When you trade, do you favor rules or intuition?
Vinny – Jesse Livermore?…
Yogi – Thanks for the rec. I’m always looking for a new book.
maybe the rules need to be revised? I stick with my intuition, but that’s my preference. Taking a small loss is fine, unless it keeps producing a string of losses.
Remember that night when you were kidnapped by aliens? Well, those anal probes were merely done to distract you while Goldman’s alien agents implanted a chip into your brain stem. With this chip, Goldman’s trading robots know your trading rules just as soon as you conceive of them. Only by trading on intuition – on the fly as it were – can you confuse the robot.
Bought $WYN 21.99
Sold $WYN 22 flat
This first piece of the series is only an introduction.
Hey chart addict, what are the top 3 book you recommend reading?
Thank you,
John
u should prob start with all of Toni Turner’s books
thank you sir.
i was going to ask the same question. Dope.
watching/trading agen arrs clne rxii
WYN
Bought $STEC 20.27
and…sold $STEC 20.29
going skiing. cya
CA,
Thanks re: response to my request for printable feature.
It doesn’t even have to be a downloadable PDF version, although I’m not sure what would be easier for your website guys to provide. Most news, investment, etc. sites with articles just provide a “Print” or “Printable Version” button along with each article, which provides you with a clean, reformatted version of the article text only, in a full page format. It eliminates the article column format, embedded advertisements, side boxes (for example, all of those links to the right of these comments —->), etc., so it’s a lot easier to get the article text size right, and avoids wasting paper because it filters out all the extra stuff that take up print space. You’re left with a pure version of what you really want to print out – just the article text and any figures or charts it includes.
Thanks again. Have fun on the slopes!
STXS for swing
Bought WJA.TO @ 13.16 for a swing. Nice tight flag.
Buzzkill do you usually follow TSX stocks? Been looking for another set of eyes to trade with
Yes, I only trade on the TSX, in my RRSPs. We have a little group on twitter also.
AXL.TO up over 10% so far today…
Watchlist for today:
CUM.TO – over $2.31
CNH.TO – over $1.64
IAE.V – over 1.33
*Quick note, though, I only started paper trading in August, real trading in November, so keep that in mind. 🙂
keep this coming.
Just getting into The Magic of Thinking Big book that you recommended awhile back, very helpful stuff!
I think it may help me land a much higher paying job. Do you ever read any Kevin Kerr stuff?
I also just got that Toni Turner book yesterday from amazon. I’m looking forward to cracking it soon. I’ve almost finished a Stephen Bigalow book as well. He really digs into the psychology of candlesticks which is useful. Thanks for all you do CA.
good
Great stuff, I really appreciate the time you put into this blog and the twitter stream….You have helped my trading immensely…Thanks!
Sold 1/2 AXL.TO @ 1.50. Riding the rest…
check out flag setup on GKK (today’s 3 minute chart)
Long-time reader first-time poster.
Is anyone else watching PARD ?
I am now
CPBY at 6.60, 6.61
sold a bit at 6.73
the rest at 6.63
KYN at 23.75
sold half at 23.87, yawn
the rest at 23.89
“Citi tells investors that news sources in Germany are indicating the government is set to announce a cut to the solar PV feed-in-tariff of 16%-17% as early as next week. The firm views this news as negative for the solar industry since the Street has expecting a cut of around 10%. Citi remains cautious on the group given what the firm sees as upcoming supply issues.”
thanks for posting …caught a nice trade on FSLR Jan 125 puts
glad to hear it
thought PARD would take off but I guess BIDU was the short squeeze du jour
long CROX at 7.15 …supported by 5/20ema on intraday pullback.
out at 7.07, missed exit at 7.12 doh
long pard at 2.23
UNM had a spike on a buy from citi but looks a little too late now to me
Saw a rumour that VZ is cutting prices on Jan 18
But the move looks done for today
CYH
sold remaining AXL.TO @ 1.48
Markets are closed on Monday for MLK.
Interesting.
Watchlist for today:
TIH.TO, NVS.V, IAE.V, CAS.TO, CNH.TO
Market not looking very healthy today, though, so I might just sit this one out…
OXBT uplisted on the nasdaq this morning from the OTC…
It’s a cash burner, has only 2M in cash and 3M in equity… $140M market cap and no revenues.
Just did a reverse stock split (1:15), i believe they are going to try and raise capital.
Shorting the stock above $7 should be a nice profit by middle of next week.
I’m short in the 7.40’s
Bought GBU.TO @ 4.42