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TradingTheTape was founded in 2006 to study how volume affects market momentum. Not volume per bar but rather volume at price per bar in order to profile support and resistance levels relative to current price action. With this study it became apparent that market knowledge was not enough and that trader discipline was also critical…and elusive. This led to automated trading strategies that placed and managed trades based on criteria pre-determined by the user and without any further input from the user. Today these program trading strategies run on Chicago-based dedicated servers that can be controlled by smart phones. Current software development is focused exclusively on automated order flow analysis for both scalping and trend trading, both discretionary and fully automated program trading.
TradingTheTape by Scott Maxie
“Order Flow Determines Price Action ~ To See The Future, Watch The Order Flow”
How to trade using Order Flow Analysis (Tape Reading)
What is ‘the tape’? Think of a trader in the 1930’s jumping out of a 40 story window trailing a long paper tape behind him and you get the idea. He just read the tape and all his holdings are plummeting on heavy volume…i.e. the market momentum is screaming down, it is not coming back and he is wiped out. The tape back then literally referred to a ribbon of tape spewing out of a glass-domed ticker machine (hence the term ‘ticker tape’) with a live market data feed with prints on the tape of the last price and volume of various market instruments. In good times there would be ticker tape parades. In bad times there would be ‘jumpers’. The ‘tape’ therefore refers to order flow which is volume at price, i.e. what size traded at what price.
Today the tape figuratively refers to the typical Time and Sales window shown below. Same concept of volume at price and colored as to whether the last trade was at the Bid or the Ask. The problem with the Time and Sales window today is that, even if you could read it, it can and does give misleading information relative to expected price action. For example, a rapid series of green prints does not necessarily mean the market is going up and one should buy. Instead the prints could all be at the same price and the ‘big money’ is absorbing all the hits on the Ask until the market is forced down. In this case all those green prints mean sell.
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