Trading By Tape-Reading by Adam Wasserman
The foundation of all trading systems, indicators, and chart
patterns is the battle of the tape. If you master that, it can
make all the difference in your trading.
Regarded as one of the first-ever successful
strategies for traders, tape-reading is trading in
its purest form. Charts, technical indicators,
red lights, and green lights work wonderfully
when mastered, but all are products of the tape and donít exist without it. By withstanding the test of time, tape-reading has proven to be the most consistent method of
pulling money out of the stock market for a trader.
WHAT IS THE TAPE?
To understand tape-reading, we must understand the fundamentals
that make up the New York Stock Exchange (NYSE).
The NYSE trades in a continuous auction format, one that is
driven higher by aggressive buyers or forced lower by aggressive
sellers. The tape is made up of integral variables: the
symbol, last price, last trade size, net change, bid, ask, bid size,
ask size, high, low, and volume (Figure 1). From reading these,
a trader is privy to recognizing patterns that define the amount of stock to be purchased
at a higher price and the
amount of stock to be
sold at a lower price.