The Art of Tape Reading: Part 1

As many of you know, there are many day trading strategies out there. Some with robust risk management and some without. One day trading technique that many traders struggle to find solid risk management strategy is Scalping. Nonetheless this is not the case for day traders that understand the art of tape reading.

6E futures: Supply IMBALANCE seen on the tape

The tape is short for time and sales. Some will prefer to call it time of sale aka TS. Many platforms will not give time and sales information thus showing the power of this information or data feed. The TS window or indicator will basically relay level II data in real time.

Level II data shows active buyers and sellers real time, the volume or contract size and the prices at which they are getting filled. One indicator that does this very well is the vvAggregatedTS for Ninja Trader 7. Refer to my previous post on ‘DELTA’. The 3 magic words are Price, Volume and Delta.

Block Trades/Large Prints on the other hand help us identify order flow momentum. Many day traders tend to think that when a block order long is fired one should buy in the direction of the block trade. That cannot work as shown in the screenshot below

Who takes out Who?

Speed of the tape does also helps spot momentum. For example, If offers are being taken out quickly it means the buyers/bulls are really strong. If the bids are taken out quickly, means the bears are strong. This is all momentum and scalps can be made if the direction of the order flow.

Here is a example of how I read the tape looking out for supply demand imbalances. It happens relatively fast and on one minute charts. Just watch this short amateur clip

Buying Imbalance 6E EURUSD m1

To download NT7 Reconstructed Tape Indicator [vvAggregatedTS] click the link here:

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