Tape Reading, Volume Analysis, Precision Timing
Putting each tick, volume, and price into different analysis models to measure different aspects of how a security is trading.
Abstract Root Concept:
All trading leaves a footprint (even off exchange and dark pools trading).
All price corrections start at the 1 tick level.
Tape Readers trade off measuring the magnitude of a market condition for measuring changes to market conditions more quickly.
Example 1) Tick By Tick Volume showing selling through a price rise:
One of the most coveted signals any tape reader can produce is finding when a security is being traded against a price fluctuation (especially a retest). In Example 1 price diverges with price and the expectation is for the divergence to get traded out and potentially further. It’s important to note that divergences are a market condition, since they do not provide any timing on their own, and need further analysis to determine when to execute at trade.
Example 2) Tape Reader spiking at significant level:
Precision timing indicators matter when everything has lined up and the trader is sitting with a finger on the trigger, just looking for any reason to fire. In Example 2 the tape reader is functioning as a precision timing indicator. If a trader was looking to sell that level, the tape reader would be the signaling to pull the trigger.
Tape Readers are paramount for sustainable short term scalping.
Do you still want to know more about it?
This video covers exactly how the 7 tape reading Algorithms work, and all the settings.