Tape reading is the art of studying price action real time using the Level II box. Using the tape you are able to gauge investors psychology and imbalances in demand and supply. 

 

Reading the tape is all about assessment of the bid, offer, size, volume, and prints. With reading the tape you will be able to determine where the stock is likely to move about 70% of the time.

 

Tape reading is a crucial skill to master as an intraday trader simply because it enables you to see real time where there is selling and buying happening in a particular price range. This is an extremely essential strategy since it will boost you effectiveness, risk/reward ratio, and this will help you snag even bigger moves all while helping you to take on the least measure of potential risk attainable.

 

Tape reading is actually an edge which will place you ahead of numerous people who believe that technical analysis will probably be the only stock trading method they ought to know. Tape reading can be described as a leading indicator, in contrast to charts and technical indicators that are founded on past data. 

 

With reading the tape you are able to take a look at what price level an individual is buying or selling and get in at great entries while keeping marginal risk. 

 

The final thing tape reading provides you with an advantage over is against computerized algorithms and high frequency trading. 

 

By reading the tape you'll find the active buyers and sellers and figure out what levels they're taking part at by observing the supply and demand these people search for. 

 

You're able to follow a particular buyer and recognize the pattern through which they are acquiring the stock. It's the same for sellers. By reading the tape you'll be able to identify the patterns which the charts tend not to display and with this it will be possible to go into and out at the best prices. 

 

With tape reading you can actually actually feel how the market is actually taking your orders and have a sense on if a specific stock is weak or strong. 

 

One example is, if your stock seems weak on the chart but it is extremely tough for your bid to get filled then that could be a clue that there's not that much selling taking place, so the stock may not be that weak in the end. 

 

Lastly, charts basically provide you with historical data. Given, charts will work however when you combine tape reading and technical analysis you'll possess an advantage that up to 90% of stock traders don't.

 

Tape reading isn't a science. I only say this because it's not something you can just read and watch a youtube video on to become an expert. Tape reading is a thing you understand over long observations and your own experience.The more you observe the tape, the more you'll be able to recognize specific patterns. The basic fundamentals of tape reading are incredibly simple, but when you finally understand the foundations of tape reading you will only improve in time.

 

Reading and using the tape can lessen your potential risk. By utilizing the tape you can actually detect accumulation and get in in the accumulation level while exiting in the event you spot the accumulation has finished. 

 

In addition, by tape reading you'll be able to detect held bids or offers and step in front of them to obtain ideal trades on moving stocks. If you would like to invest in inside an uptrend but don't want to chase you can easily search for a held bid to go into while keeping your potential risk minimized as opposed to chasing and taking on undo potential risk. 

 

Tape reading will improve your knowledge of chart patterns because you will be able to be conscious of the supply and demand dynamic in real-time. In case your stock showed some technical support, and you also saw there seemed to be accumulation on the tape, an incredible trade is to buy while keeping your risk limited. 

 

Also, if your stock reaches a substantial long term technical level you are able to detect on the tape how it’s reacting to it and trade it from there, all by watching what the sellers and buyers are doing real time.

 

Improving your tape reading skills will require time. You will only get better every single day observing the tape. You'll learn and discover more things on the tape three months from now than today. 

 

To help speed up this learning curve you can watch video footage of your trades. You will only progress in the future the greater you pay attention to the tape and review the stocks you trade. It can also help to watch video of trades you've made throughout the open and close to review. It is a lot easier to spot something within the tape when you are not in a trade and the market is not open.