Tuesday, March 6, 2018

Learning to Read The Tape

Reading the Tape
Traders read the tape - ticker tape in the old days to determine the recent buying and selling pressure. Here lies the importance of volume. It's easy to spot a large buyer or seller when the volume is light. Big buyers usually enter before big moves.

Jesse Livermore read the tape and never fought it.

Of course there is always a reason for fluctuations, but the tape does not concern itself with the why or wherefore. It doesn’t go into explanations. I didn’t ask the tape why when I was fourteen, and I don’t ask it today at forty…, Reminiscences of a Stock Operator.


"So a synthetic gap occurs when two or more gaps appear in the same price area and they are then defined by the smallest of the gaps that overlap. Is that correct?"

Synthetic Gaps

Gaps overlap within congestion zones. It's a fact learned by every master trader. They key to defining reversal points is understanding these zones.

The computer recognizes all gaps as congestion zones, so it creates the small gaps closest to price to define the congestion. It redefines the synthetic gaps as price rises or falls until the congestion zone is cleared. Price often accelerates after congestion is cleared. This generates one of the most important observation within trading, a trend is defined by what happens within congestion zones, not between them. Trading action between congestion zones is basically noise, I might say meaningless price action.


Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.