I won’t be possibly aware of all the dynamics surrounding stock price movements, so I primarily analyse from data of a price/volume action to form my momentarily opinion objectively for day trading decisions. Frankly speaking the tape reading is close to the current reality of the market. All other indicators are either hints or distortions.
As a tape reader trader I have to master my trading style without involving emotions. I behave like a detached observer during the session.
I trade by tape reading primarily as my base method. Tape Reading does not always answer all my questions. In the stock market, nothing does. So, I also use charts as secondary tool to determine trend, R/S levels and few patterns to maximize profit opportunities. I emerge as a profitable trader most of the time by mixing the mechanical approach (charts) with my tape reading abilities.
Tape reading is the art of finding the immediate trend of prices by analyzing modern electronic order screen (previously used as tape). It is not merely watching the prices at the screen, but it’s weighing the momentary supply and demand and volumes in selective stocks and in the overall market.
Remember, stock just sold at a price is a history. Market Price and its trend is most heavily and primarily influenced by current bid and the asking price. The balancebetween selling and buying VOLUME decide about the stronger pulling power that determines price and trend. A sudden demand or burst of liquidation may enable us to form a new plan. It’s important to watch market index 100 besides bid and asking price.
The main focus must always be on bid and asking price with corresponding volumes, charts can be referred with intervals as a mechanical help as well.
However, charts must never act as distraction from main focus on tape reading, but only as regular secondary aid especially for R/S levels and be used in particular pattern formations, if applicable.
A market which swings in a radius of couple of points cannot be said to have a trend, and it’s good for me to avoid. The reason is- each risk should contain a probable 3 to 5 points profit or its not justified.
I must wait patiently for the chances to make, 3, 5 or 10 points. I must not act in haste to get hold of everything that looks like an opportunity. It is not required of a good trader to be in the market all the times. I must pick simply the best of what the tape offers.