Tape Reading 101 Book
March 25, 2017 | Author: Scott Tran | Category: N/A
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JOSE CASANOVA
Tape Reading 101 Introduction To Reading The Tape www.josecasanova.com
Tape Reading 101
Josecasanova.com + Tim Ungacta
Introduction
What is tape reading? Tape reading is the art of studying pure price action in real-‐time, based on the data fields in the Level II box. Using the tape you are able to gauge player’s psychology and imbalances in supply and demand to formulate trades. Tape reading is a leading indicator because it analyzes current: bids, offers, and volume transacted at a given price (collectively known as “order flow”) as they happen, unlike charts and studies, which are derivatives calculated from order flow data and displayed after the fact. Bids, Offers, and actual transactions are what happen NOW. Charts, MACD, RSI, are created later. They are the history of price action. Because you see the characteristics of buying and selling as it happens, developing this skill will improve your entries and exits, minimizing your risk and maximizing your reward by allowing you to catch larger moves using smaller stops. Tape reading is a tool that will put you ahead of many other traders who think technical analysis is the only skill they should know, giving you access to more plays that charts simply don’t show you. With tape reading you will be able to determine where the stock is going to move 70% of the time. Why is tape reading important? Because it gives you an edge, an additional tool to improve your entries, exits, and trade management. Back before charts were actively used, most intraday traders would trade by using their skills of reading the tape, and reading the tape only. There were no charts or indicators for them to use. The last thing tape reading gives you an edge to combat the algorithms and HFTs prevalent in today's trading environment. What can you see on the tape that you can’t see on the charts? Bar/Candlestick charts depict a range of price action defined by the open price, range, and close price, over a specific interval of time, or in the case of tick charts the price action over a specified number of transactions. What the individual bars don't tell you is how bids and offers acted at a given price, or the specific volume transacted at a price, within the time-‐frame (or transaction count in the case of tick charts) of the individual bar. By reading the tape you can see the active buyers and sellers and see what levels they are participating at by watching the supply and demand they seek. You can follow a certain buyer and recognize the pattern in which he is accumulating the stock. The same goes for sellers. With tape reading you can feel how the market is taking your orders and have a sense as to whether a certain stock is weak or strong. For example: if a stock looks weak on the chart but it is very difficult for your bid to get BIDHITTER HOLDINGS, LLC 2 | P a g e
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hit then that is a clue that there is not that much selling happening, so the stock might not be that weak after all… but more on this later. Finally, charts are showing you past data... granted charts are valuable, but when you mix tape reading and technical analysis you will have an edge many intraday traders do not possess. How tape reading is an art and not a science Tape reading is not a science. It is not like learning how to do an experiment, and then being able to repeat the experiment with success ad infinitum. Because trading is a probability driven activity, and different stocks have different “personalities,” tape reading is something you learn over long periods of observation and personal experience. The more you watch the tape, the more you will be able to identify certain patterns. The basics of tape reading are very simple, but after you understand the foundation of tape reading you will only get better over time. How does tape reading affect efficiency with entries and exits? We defined the difference between the tape and charts in an earlier question. The granularity of real-‐time data on the tape, because it allows you to analyze “intra” bar data. It also allows you to choose entries and exits, with finer granularity. You don't have to wait until the next bar on the chart to make a decision, which could both reduce your profit potential and increase your stop risk. Here is an example of using the tape to get long at a great entry:
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In this chart, you can see that GMCR gapped up big on news over the weekend. By using just the charts, your entry would have been long at $34.15 when it broke the high or even $33.96 when it broke the mini range. By using the tape to find an entry you would have noticed there was a held bid and accumulation around the $33.50 level. You could have gone long at $33.51 with a stop at $33.44 (or when the bid dropped and offer held below 50c). That would have been a great entry and tighter risk using the tape instead of getting long at $34.15 or $33.96 risking about 50 cents. Also, your risk reward ratio is heavily skewed in your favor using the tape. How does tape reading lower risk? A good example is the one above on GMCR. By using the tape you can spot accumulation (held bids) or distribution (held offers) and go long (just above a held bid) or go short (just under a held offer), using a break of the held level as your stop. If you are looking to buy in an uptrend, or add to your position, but do not want to chase you can look for a held bid to get in, and the subsequent failure of the held bid to get out, keeping you from taking on unnecessary risk. Below is an example of lowering your risk while finding great entries and exits:
ASTM was in play after a trading halt, and subsequent re-‐opening, moving down sharply, we don’t usually play stocks that are/were halted but this presented a great risk reward situation to enter a trade. Although ASTM is a cheap stock (we don’t usually trade sub $10 stocks either) there was a great opportunity to trade it. ASTM opened up after the halt and dropped sharply. We looked for a great entry to short while keeping our risk low. ASTM bounced and started to hold an offer around $3.60. Also, when the offer was being held another big offer showed up. BIDHITTER HOLDINGS, LLC 4 | P a g e
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You can't see that on the chart, but you can, if you know what you are looking for, see it on the tape. We got short and waited for the offer to get filled to get out. Our risk was about 3c if we saw the order decrement quickly we would have hit it also and not waited for it to get filled. Some of the order got filled but not quickly then the stock dropped. The stock kept dropping and the offer kept stepping lower. Finally the remainder of the order was filled around $3.15 where we exited. Not a bad trade risking a few pennies to make about 45 cents. How does skill at tape reading improve understanding chart patterns? Tape reading will improve your understanding chart patterns because you will be able to see the supply and demand dynamic in real time. A prime example of this is GMCR from above. GMCR showed some technical support and you saw there was accumulation on the tape, a great set up to get long while keeping your risk tight. Also, with tape reading if a stock reaches a significant long term technical level you can spot on the tape how it’s reacting to it and play it from there, all by seeing what the buyers and sellers are doing real time. How do you improve tape reading skills? Improving your tape reading skills will take time. You will only get better by watching the tape. You will understand and see more things on the tape 3 months from now than you will see today. To help accelerate the learning curve you can watch video recording of your trades or watch video tape from the Bidhitter.com library of trading tapes. It is easier to spot something on the tape when you are not in a trade and the market is closed. As I said before, the best thing to do to speed up the improvement process is to screen record your trades, and then review them after the close when you are not under the stress of the trading market, and to tap into the Bidhitter.com video library of recordings. Trading the open with only reading the tape Trading the open with just charts is difficult because actionable levels for the day have yet to be defined. Granted, you have previous technical levels from other days and time-‐frames but your edge on the open will most likely be on the tape. Intraday traders make most of their money on the open and the close because those are the times when the market and individual stocks move the most and have the most volume during the day. By knowing the Market Maker box you can find key levels, almost predicting where the chart will go, and find good entries for longer-‐term trades. With the Market Maker box you will be able to find key levels where significant volume has been done and trade off those levels while keep your risk tight. If a certain level has done a significant amount of volume and doesn’t break it, then you have spotted a great entry to trade BIDHITTER HOLDINGS, LLC 5 | P a g e
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with a core while scalping around it to lower your risk and make some quick chops when you spot them on the tape.
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Level I & II Box Level I & II Box
When talking about “reading the tape” we are talking about the Level I and II box. The Level II box shows us who is willing to bid and who is willing to offer with how much and at what price. Level I Above is a screen shot of a Level I and II box also known as the market maker box. Highlighted in white is the ticker of the stock you are looking at and next to it (if you are in a position) is the number of shares you have and your average price. Below that, highlighted in grey, is the Level I box. This shows the, from top row going from left to right, last price the stock traded at (LAST), the price change since the day before (CHG), the amount of size the last price was traded at (SIZE). On the second row shows the highest the stock has traded for that day, or high of the day (HI), the price where the stock opened (OPEN), and the amount of volume the stock has BIDHITTER HOLDINGS, LLC 7 | P a g e
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traded so far on the day (VOL). In the row below that shows the lowest the stock has traded for that day or low of the day (LO), the price the stock previous closed (CLOSE), the amount of shares your tier size is set to (TIER). Finally on the last row it shows the percentage change since the day before (CHG%) and the last portion of the row shows the spread of the stock, or the difference between the bid and the ask/offer (SPR). Level II Below the Level I box is the level II. On the left side of the Level II box are the bids and on the right the offers. The bids are always on the left and the offers are always on right. The bids shows the best price people are willing to buy at and the offers are the best price people are willing to sell at. Highlighted in light green are the bids. The bids are always stacked from the best price people are willing to buy at the top, and the lower prices people are willing to buy are below them. Below the best price ($35.88) are called the underlying bids. On both the bids and the offers, they are shown from left to right as SIZE, ECN, and PRICE. For example, on the bids, it shows 7 arca 35.88. This means that there are 700 shares on ARCA at $35.88. Below that are the different ECNs and the different size on them at what price. The same goes for the offers. The best offer shows 11 arca 35.91. This means that there are 1,000 shares on ARCA at $35.91. The underlying bids are from 1 edgx 35.86 and below. The underlying offers are from 8 bats 35.95 and above. This means once all of the shares at $35.88 are filled the next best price people are willing to buy at is 35.86. The same goes with the offers that once the offers at $35.91 filled; the next best price people are willing to sell at is $35.95. You should always keep an eye on the underlying offers and bids when looking to get in a position. This helps you know your REAL RISK. How many bids underlie your long entry determine how easy it will be for you to exit should you be stopped out. The greater the number of underlying bids, the easier it will be to exit your position. The same goes for the depth of offers should you be short. Always know your real risk and possible/realistic exits before you get into a position. Also, by using the information of the underlying bids you can tell how strong or weak a stock is. If there are more underlying bids for a good amount of size then this might indicate that the stock will trade higher from its price. Finally, the underlying bids and offers are all relative to the stock. This means that they have to be significantly different from the other bids and offers to stand out. Time and Sales On the right side of the Level II box you will see the prints. These are the actual transactions. The prints are highlighted in a purple box on the image above. The prints tell the price and the size of each transaction. They are in the colors of green, white and red. A print in red means the stock traded on the bid, a print in green shows that the stock traded on the offer, and a print in white indicates a trade between the bid and the offer (inside market). White prints are common for stocks that have larger spreads, people “chiseling” (or putting in an order half a BIDHITTER HOLDINGS, LLC 8 | P a g e
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penny higher than bid or lower than offer), or if the stock has a tight spread it can be an algorithm or hidden buyer/seller. A common mistake for most new traders is to think that if the stock is printing red then it’s being sold and if it’s being printed in green then it must buying. Remember, for every buyer there is a seller and vice versa. In the image above GMCR the last print was $35.91 5 on the offer. This means that someone paid the offer for 500 shares on GMCR. Finally, on the example below you will see two prints that are highlighted in green. This means those prints were paid through the offer. This goes the same for the bid if it is highlighted in red. You shouldn’t pay much attention to the highlight prints for now. The through prints can just be someone using a market order. The only time to focus on the through (highlighted) prints is when a stock is moving very quickly in either direction and the buyers/sellers just want to get rid/get more of their stock.
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With the example above fill out this quiz below: 1. What is the ticker is on the box? 2. What was the last price it traded at? 3. What is the net change of the stock? (both dollar and percentage wise) 4. What was the open? The close? High? Low? Spread? 5. What is the spread of the stock? 6. Was the stock last traded on the bid or the offer? 7. How much volume (on the prints) was done at 161.22? 8. What is the next underlying bid if 161.22 get taken out? Next underlying offer if 161.23 gets taken out? 9. What ECNs are on the bid and offer and for how much size? 10. How much volume has the stock done so far? 11. What price was the stock last print in the inside market? (between the bid and the offer)
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Answers for prints 1. What is the ticker is on the box? a. Gs, Goldman sachs 2. What was the last price it traded at? a. 161.23 3. What is the net change of the stock? (both dollar and percentage wise) a. $-‐5.44, -‐3.26% 4. What was the open? The close? High? Low? Spread? a. 164.30 open, 166.67 close, 164.38 high, 158.45 low, 1 penny spread 5. What is the spread of the stock? a. 1 penny 6. Was the stock last traded on the bid or the offer? a. offer 7. How much volume (on the prints) was done at 161.22? a. 2,300 shares 8. What is the next underlying bid if 161.22 get taken out? Next underlying offer if 161.23 gets taken out? a. 161.21 bid, 161.25 offer 9. What ECNs are on the bid and offer and for how much size? a. 500 arca 161.22 and 200 nasdaq 161.22 bid, 200 arca 161.23 and 200 nyse 10. How much volume has the stock done so far? a. 10.7 million shares 11. What price was the stock last print in the inside market? (between the bid and the offer) a. 161.22
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Prints Prints
What are prints, where are they located on the box, and how are they apart of “the tape”? Prints are the price at which the stock is currently trading, simple enough right? They show you if the stock is currently being traded on the bid or on the offer (ask).They are located on the right side of the box as shown in the image above. The prints are what the old school traders (back in the early 1900s) used to determine the strength and weakness of a stock. They are the electronic “tape.” Obviously we have better technology now, but the same theory applies. With the prints you will be able to see the strength or weakness of the stock and at what prices
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there are buyers/sellers. Combining the prints, level II, charts, and the futures (or sector etfs) can show price inefficiencies to exploit. What is a red print? A green print? A white print? If the print is red then it means the stock is trading at the bid. If the print is green then the stock is trading on the offer. Finally, if the print is white, then the stock transacts between the bid and the offer. White prints on tight spread stocks are usually for hidden buyers/sellers and/or algorithms, in the image above you see the last print (its shows the most recent transaction at the top) was Z 62.83 1 in white. Therefore it traded between the bid and the offer (it was probably 62.835) for 100 shares on the ARCA or BATS ecn. Below that was Z 62.83 1. This means that the print before the last one was traded on the bid for 100 shares at 62.83 on arca or bats (Z exchange on prints can be arca or bats). Decoding the ECN from the prints is not that important, just keep track of the letters to keep it simple. Through Prints Usually market orders, through prints are the highlighted prints that transact above or below the best bid/offer. They are relatively unimportant. Prints move to fast and I can’t read them, what do I do? This is OK. Sometimes prints will be moving too quickly to keep track and cleanly read the tape. Over time you will become better and faster at reading the prints. Also, stocks with high volume usually print really fast and are difficult to read. The perfect example for this is the SPY ETF, which tracks the S&P and usually trades at least 150 million shares per day. Your best bet is not to try to read the tape on ETFs but stick to readable, in play stocks that trade anywhere from 1 million shares to 20 million shares per day. Using prints as an indicator Prints show you at what price and at what size the stock transacts. Volume and price patterns are created through the prints, defining important levels from which to structure your trades. Printing repeating on the bid, printing repeating on the offer If you are watching the prints and see that the stock keeps printing on the bid at lower prices than this is a sign of weakness. Also, if you are watching the prints and see that the stock keeps printing on the offer at higher prices then this is a sign of strength. If you see the stock constantly printing on the offer then that means someone really wants the stock, they’re aggressive enough to pay the offer and spread to get the stock because they want right now.
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They’re not willing to bid for the stock hoping and waiting to get hit on the bid. This isn’t always the case but sometimes it is, with experience you will differentiate when it is or isn’t. Big prints When a stock prints 100 shares and 200 shares and 100 shares at a certain price (lets say $50) then you might see a print for 100,000 shares at the same price ($50). This is considered a big print. Big prints are usually institutions and institutions most of the time dictate the order flow since they have more money than you. This is a clue to what they are doing; you should pay attention and remember it. That print of 100,000 shares at $50 is now an important price. If the stock keeps trading at $50 and the bids hold then this is a sign of strength, if the bids drop then the stock is probably going to trade lower. You should watch the prints and see how they react to that price and size. Big prints are all relative to the amount of volume traded and how many shares each print has been printing. A big print is usually a print that sticks out compared to the other 100 shares prints and the current volume traded.
Before: Big print in LLY at $39.46
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After: LLY traded higher
Big prints in P near the low
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P trades higher Big print then big print higher A stock is trading at $50 and the stock has a big print of 100,000 shares then trades higher and you see a big print for 125,000 at $50.25 this indicates it will likely trade higher. The big print and big print higher indicate institutional buying. This is a bullish indicator. If you see a big print, then a big print higher on a down trending stock then this might present a great opportunity to get long the stock. It doesn’t mean trying to catch the bottom hoping for a big print and big print higher or mean that you should get long in a down trend. Getting long a down trending stock is not always the best play, but if there is a big print then big print higher, you see bids holding and it breaks it down trend line then this should be an excellent to get long. The opposite is also true, if you see a big print then a big print lower; it signals that the stock is weak and probably going to trade lower. Speed Each stock trades with a certain rhythm and pattern, your job as a trader is to recognize it. You should recognize how often and repeatedly the stock prints and at what speed. When a stock is quickly printing on the offer and then prints faster, that is bullish. The buyers are getting more aggressive and are paying for the stock. It may be about to break out if it’s at a level of resistance or that they have a buy order than is about to get filled. Another thing you should BIDHITTER HOLDINGS, LLC 16 | P a g e
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notice is that if an offer steps down and gets taken immediately, this might mean that there is demand at that certain price. If you see that an offer steps down, lifts and see it quickly printing on the offer then the stock is strong and the offer is being taken immediately. The buyer is willing to buy any stock on the offer which means they aggressively want it. If a stock slows its printing then it may not be in play at the moment, and you should move on. Volume Watching, noticing, and remembering how much volume is done at certain prices is important when reading the prints. When an unusual amount of volume is done at a certain price then this level becomes important around which you can structure trades. A rule of thumb is the more volume that is done at a certain price the bigger the move that is expected once price moves away from that level. Remember, the volume is all relative to how much the stock has traded, how much you expected to trade at that level via level II, and how much volume is done around the level. Also remember that just because a stock does extensive volume at a certain price and trades up a few pennies doesn’t mean you should be long. Combine the level with the charts and what the box/tape has been telling you. Here is an example: if a stock trades 300,000 shares between a 10 cent range then the stock breaks the range, you might expect a move of about 25 cents, but if the stock trades about 3,000,000 shares between that 10 cent range then you should expect at least a 1 point move when the range breaks (this doesn’t mean you should be stubborn and wait for a point if the stock doesn’t do it). The amount of volume had done at certain levels give you an idea of how much a stock might move away from the level. Hidden buyers/sellers If the bid is at $50.10 and the offer is at $50.20 but you notice prints $50.12 (white prints to be exact since they’re between the bid and the offer) continuously then this is an example of a hidden buyer. You should pay attention to this and gather information about it. If you notice that the offers step down to $50.18 and they get taken immediately then this means the buyer is willing to buy at whatever price you are selling at and it is a bullish signal. This will present a great risk/reward setup. The opposite is the same for sellers.
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Nflx had a hidden buyer in the $66.50 area
Hidden buyer accumulating and then it trades higher
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Pot had a hidden buyer in the $40 area
Pot trades higher
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Rig had a hidden buyer in the $42 area
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Big buyer/seller with a refreshing ECN If the bid is at $50 and the offer is $50.10 and you see a bunch of prints at $50 and the buyer doesn’t drop then this is an example of a big buyer. We watch the prints and notice how much he is buying, if he buys a ton and doesn’t drop then this is a good entry to get long, with you exit if he drops. This will present great risk/reward setups. If you see BATS on the bid at $30 and they’re showing you 100 shares (or anything less than 1000) and you notice a bunch of prints at 30 then this is an example of a refreshing ECN. The buyer is hiding his size and is trying to accumulate a sizable amount of stock. You want to get long here at the price (getting long on the bid on a different ECN) or a penny above it, while your risk is if he drops the bid. You should follow the refreshing ECN. Also, sometimes there will be a big buyer at a certain price, for example $50, just accumulating on the bid and refreshing. Sometimes they will drop the bid 5 cents and raise the bid back to $50. You should always hit out of the stock because it hit your exit but you can always get back in while putting your risk at the low of that recent drop. Big buyer/seller drops or lifts When we notice that there is a big buyer or seller and we are in the opposite side of the trade then we exit the position assuming that the stock will go against us. For example: if you are long AMZN and notice a big seller then you exit the position thinking it’s going to go down. If the seller lifts then it is a good time to get long since they are done selling, the same goes if a big buyer drops. Remember, this isn’t only one reason to get in the trade, you have to have all the other indicators pointing in your favor (technical’s and tape).
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Buyer was holding the RIG at $42.70
Buyer drops and RIG trades lower Probabilities Trading is a game of probabilities. On any given trade the indicators can be wrong. Therefore, to increase the probability of success on any given trade, the more indicators in your favor, the greater the likelihood of success. You may still enter a trade if all indicators are not in your favor, but you must then reduce your position size to counter the increased risk. Using prints and level II together By using the level II to see the characteristics of stock at the bid and offer, while seeing how much is printed at a given price, you can gauge supply and demand, as well as identify hidden buyers and sellers. Using them together you can identify high probability entries that you might not be able to see on the charts. By using the level II and prints you will see if there is a buy order or sell order (via the ECN, trading pattern and prints), follow those orders, see when they are finished and make a chop by doing so. That is something you won’t be able to see on the charts. Gauging volume and supply and demand allows to size properly based on the underlying bids/offers to reduce slippage. Finally, by using tape reading to your advantage you will be able to see the algorithms/HFTs and combat against them. BIDHITTER HOLDINGS, LLC 22 | P a g e
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What different prints means and what are some bullish and bearish prints The table below provides examples of print characteristics to help define the strength of a stock. (Reminder: 1 ARCA = 100 shares on ARCA, 10 ARCA = 1k shares on ARCA, 100 ARCA = 10k on ARCA. Whatever the number is multiply it by 100 and that is how many shares. Single digits = hundred(s) which can be 100-‐900. Double digits = thousand(s) which can be 1000-‐9900. Triple digits = ten thousand(s) which can be 10,000-‐99,900 and so on) The bid shows 10 ARCA and prints 60k on the bid at the same price and holds The offer shows 10 ARCA and prints 60k on the offer at the same price and holds The bid shows 70 ARCA, prints 9k on the bid, and refreshes The offer shows 70 ARCA, prints 9k on the offer, and refreshes The bid shows 70 ARCA, prints 7k on the bid, and then the bid steps higher The offer shows 70 ARCA, prints 7k on the offer, and then the offer steps lower The offer shows 70 ARCA, prints 7k on the offer, and then the bid steps higher The bid shows 70 ARCA, prints 7k on the bid, and then the offer steps lower The bid shows 5 ARCA, prints 7k on the bid, drops, then rebids at the same price The offer shows 5 ARCA, prints 7k on the offer, lifts, then steps down to the same price The bid shows 60 ARCA, prints 6k on the bid, drops, and the offer steps down lower than the previous bid The bids get hit quickly and drop, moving the price lower The offers get taken quickly and lift moving the price higher The stock is quickly taking the offers and taking the offers and taking offers higher and then will not take the next offer and slows The bid gets hit and holds and steps up and gets hit and holds and steps up higher and gets hit and holds higher and steps up higher and then gets hit and drops Big print and the next prints are higher Big print and the next prints are lower Big prints and big prints higher Big prints and big prints lower The bids are tested and holds The offer is tested and holds
Bullish Bearish Bullish Bearish Bullish Bearish Bullish Bearish Bullish Bearish Bearish Bearish Bullish Bullish overall but bearish for that price Bullish overall but bearish for that price
Bullish Bearish Bullish Bearish Bullish Bearish
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Bidding, Offering, Overlapping, and Sweeping Bidding, Offering (limit order), Overlapping, and Sweeping
The green box on the top left of the left image shows BID 1,000 DANG, which means you are bidding for 1,000 shares for DANG. The image on the right shows the red box on the top left, displaying OFFER 1,000 DANG, which means you are offering 1,000 shares of DANG. What is a bid? What is an offer? A bid is a limit order representing the highest price at which people are willing to buy the stock. An offer is a limit order representing the lowest price at which people are willing to sell the stock. Proficiency employing limit orders. Is a skill that will save you money over your trading career? By bidding and offering you provide liquidity in a stock, lowering your commission through the ecn rebate mechanism. Employing limit orders helps develop patience and discipline, allowing you to get the best possible entry price. You should always bid or offer on wider spread stocks, you don’t necessarily have to place your bid at the bidding price but instead between the market. The same goes with offering. You should bid or offer when the stock isn’t going to move very quickly. BIDHITTER HOLDINGS, LLC 24 | P a g e
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What is sweeping? Sweeping is when you want to get in or out of a stock immediately. The difference between sweeping and a market order is that it will limit the price where you will get filled up to a certain amount. Instead of sending out an order to fill all of your shares at the market price it will limit you to an adjustable, pre-‐set amount (eg: $.10 above/below the offer/bid). For example: if you had 1,000 shares of ABC stock long and wanted to get rid of it (hit the bids) using a market order then you might get filled anywhere from .1 to 15 cents away from the market price depending liquidity (amount and price of underlying bids/offers). The more illiquid it is, the more you will move the price. If you use the sweep key then it will only fill you up to 10 cents on the amount of stock that is available. This might not fill your full order within 10 cents (sweeping), but it’s better to get some of your order filled up to 10 cents and have more control over your exit than getting filled farther away than you expected. This is useful because some algorithms are able to identify market orders and pull their orders just to fill you lower. Perhaps you want to get long a stock when you see a huge offer decrementing expecting a break out. If you sweep at the offer but it breaks out and it hasn’t filled your order then you will get filled all the way up to 10 cents from the offer. This is useful because some stocks tend to break out 20 cents immediately and if your order wasn’t filled using market before then it would have filled all the way till it did (market). That is an example of when sweeping is better than a market order just because you have more control over the price(s) you are getting compared to market orders. This gives you better control of your risk since you have more control of your entries. There is no pop up for the sweep key, unlike when you bid or offer. You should always sweep if you want a stock RIGHT NOW, especially momentum plays. When to bid/offer vs. sweeping? Previously we explained what it is to bid/offer and to sweep. Now when do you use them? You should always try to bid for a stock or offer it out, but sometimes when a stock is moving fast you will have to sweep to fill your order, which is the same as just paying the offer if your bid isn’t getting hit or hitting the bids if your offer isn’t getting filled. The times to sweep are when you want to get the stock right at that moment. Some examples are when the stock is moving very quickly, when it’s breaking out, or when it’s breaking down. You should always bid or offer for stock when there is a large spread. Final reminder, you should always try to bid or offer for stock and the only times not to are when you need to get the stock right at the moment, its moving very quickly and your bid/offer isn’t getting filled, or when you have a bid/offer and it’s just not filling your or people are jumping in front of you. Using your judgment you’ll know when to bid/offer or sweep. BIDHITTER HOLDINGS, LLC 25 | P a g e
Tape Reading 101
Josecasanova.com + Tim Ungacta
How does bidding and offering lower your cost? How does sweeping raise your cost? Bidding and offering lowers your cost in two ways. First, when you provide liquidity to the market you receive a rebate per share. This means that you will be sitting on the offer or bid waiting to get filled and in turn providing the market with liquidity. Another way it lowers your cost is you get better prices because you are setting the price where you want to get the stock. Instead of sweeping and might get slippage of a few cents you will be able to get the price you want. Over time these pennies will add up in your trading career. The way sweeping raises your costs are that you are taking liquidity from the market so you will be charged a little extra in commissions per share. Another way you will raise your cost sweeping is by not getting the best prices that you want when you sweep. Granted, most of the time you will get whatever the offer is, but sometimes there will be slippage. Buying on the bid or selling on the offer on different ECNS and using hidden orders Sometimes when you are trying to get filled on a certain ECN you might not get filled. The best way to go about this is to use a different ECN, sweep or hide your order. A hidden order is exactly what it seems, an order that is hidden. Hiding your orders is beneficial when you do not want the algorithms or other traders to see your order. When there is a held bid or offer and you are not able to get filled at the price on the same ECN that is refreshing then you should probably sweep, step in front of that order, or use a different ECN on that same price. The way orders are filled are FIFO, which means first in first out so if there is a huge order at a certain price then you will have to step in front of it or get a different ECN in order to get filled. What is overlapping? Overlapping is when you put your offer below the bid by a certain amount to hit the bids/offers down/up to a certain price to fill your order. You will also overlap when you have to flip a position. It is pretty much the same as the sweep key but with more control. You would over lap to make sure you get filled and take all the visible orders stock available up to a certain price that you set. Final reminder, overlapping will fill you up to a certain price that you set and try to fill you up to that price with all the stock that is available. Below is an example of overlapping bids and overlapping offers. The image on the left shows a buy of 1,000 shares up to $33.55. Granted, the order should get filled up to 54 cents just by looking at the level II if you were to overlap right at that moment. The image on the right shows an order to hit the bids for 1,000 shares all the way down to $37.40, but just by looking at the level II your order should get filled by $37.48.
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Tape Reading 101
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Things to consider when sweeping or bidding/offering You should always consider the pros and the cons when you are deciding whether to bid/offer or sweep. Listed below are some questions you should ask yourself when doing so: §
What is your risk if you do not take the offer? Hit the bids?
§
How easy is the stock to buy on the bid? Sell on the offer?
§
What effect will placing a bid have on the stock? Placing an offer?
§
What is your trading style?
Listed below are some examples of what you should do in certain scenarios: Note: The examples go both ways and you should have multiple indicators in your favor when trading certain scenarios. §
If the stock has fallen quickly and there are no bids o
§
If the stock has fallen quickly and there are bids o
§
Throw in your own bid if the down move slows and keep a tight stop
Get in front of the bid with your own bid
If the stock has a down move and there is a refreshing ECN
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o §
Get in front of the ECN with your own bid or match the bid with a different ECN
Pay the offer when the stock breaks out
You are long and the stock climbs quickly o
§
Josecasanova.com + Tim Ungacta
If the stock is in a range and breaks out o
§
Try and sell on the offer, but if you can’t get filled then hit the bids
The stock climbs and then stops because of a refreshing ECN o
Try and sell just below or at the refreshing ECN on a different ECN
Generating Information by your trades and orders Each time we place an order we generate information because you are also a part of the stock and its order flow when you execute a trade. Whenever you put on a trade, there is someone that sold or bought from you. Each time you place a trade you are gaining information from the stock. How? Ask these questions: How quickly do your orders get filled? At what price? Are even getting filled at all at that price?
You must gather all of this information when analyzing a stock. Sometimes you will notice that you put a bid in and it will get filled quickly. This means that someone quickly sold to you. Sometimes you will post an offer and you won’t get filled for a while, or at all. Therefore, no one is willing to buy at that price the speed of which you get your orders filled shows how urgently people want to get in or out of a stock. Sometimes you will offer at the offer and the offer will step down. Then you notice if you cancel the order that the offer goes back to that price. Sometimes you will drop the offer, and again the stock will move the offer down and then you just hit the bids to get filled. Sometimes you will see the bid and offer move from where you put in your order. Take note of these changes in the stock and remember them. Sometimes you will be long in a momentum move upward. You can generate information by trying to sell a very small piece of your position on the offer, if you get filled quickly then the stock might still have more room upward. If you do not, then the stock might be about to slow down. Another example: you short in front of a seller. Your plan is to exit the stock if the seller lifts and you expect about 5 cents of slippage after seeing the underlying offers. Let’s say you are short in front of the seller, they lift, and you pay out of your stock. You notice that your fill wasn’t 5 BIDHITTER HOLDINGS, LLC 28 | P a g e
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cents away from where the seller was selling, the price you expected to get, but at the same price the seller was. This is information that you have just generated to show you that the seller might not be done. This is all information that you are generating from your trades that you should note. This will all give you more information about the stock than just the prints and level II. Remember to ask yourself how easy was it to get filled? How much slippage, if at all, did your exit give you? How did the bids and offers react to you putting in a bid or offer?
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Big Bids and Big Offers Big Bids What are Big Bids and why are they important? A big bid is exactly what it name says. It is a bid that is unusually larger than the normal bids that are routinely shown. Represent institutional size. These are important to watch and to keep note of because these are institutional orders and you want to follow what institutions are doing. Remember, institutions are the big money and are the guys that move stock prices. When a stock is showing 100 shares on the bid and 300 shares on the underlying bid below that then this is usually normal, small sized bids. Let’s say that you see a bid below that flash for 200,000 shares then this is a bid to watch. So what does it mean when there are 200,000 shares on the bid and 100 on the offer? It means that the stock will probably trade higher because there is greater demand for stock at a given level then there is supply. Remember to keep note of these bids and to remember the levels at which they occurred. If this big bid gets filled and holds then that means the stock will probably trade higher. If it drops, then it is probably weak. You should also notice what happens to the stock when the big bid is placed. What do you do when there is a big bid? When you see a big bid hold then you usually want to step in front of that bid to go long, exiting if it starts to decrement (or decrement quickly) or drops. Also, keep in mind your real risk and what the underlying bids are doing. When a big bid drops then there will likely be more slippage than if a regular bid drops. When there is more size on the bids than there are offers then it usually indicates that the stock should trade higher. What does a Big bid look like on the Level II? Big bids are very easy and simple to spot on the Level II. They stick out like a sore thumb. If you see a few bids for 100 shares then one bid for 100,000 then that is the big bid. It would look like this: 1 NYSE 30.20 2 arca 30.19 1000 nsdq 30.18
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2 edgx 30.16 In the example above, the big bid is at $30.18 showing 100,000 shares in size while the other bids are showing 100 and 200 shares. Like I previously stated, this is easy to spot and should be noted when spotted.
Tan had a big bid at 28.50 on NYSE
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BBY had a big bid at 25.35
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GMCR had a big bid at 51
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CHK had a big bid at 28.95 Flash orders Flash orders are when big bids are flashed at a price and disappear. This usually happens when the order is hidden but sometimes shows or if they want to see what happens to the stock when a big bid is being placed. These orders can sometimes be fake so you would have to keep track of the prints to see what happens at that price it flashed at. Keep note of these prices and note the size of the flash bids. It is the same thing as a big bid except it is just flashing in the level II. Watch and take notes how the stock reacts to these flash orders. BIDHITTER HOLDINGS, LLC 34 | P a g e
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Big Offers
CAT shows a big offer at $113.07 of 48,200 shares What are Big Offers and why are they important? A big offer is exactly what it name says. It is an offer that is way bigger than the normal offers that are shown and represent institutional size. These are important to watch and to keep note of because these are institutional orders and you want to follow what institutions are doing. Remember, institutions are the big money and are the guys that move stock prices. When a stock is showing 200 shares on the offer and 100 shares on the underlying offer above that then this is usually normal, small sized offers. Let’s say that you see an offer above that or BIDHITTER HOLDINGS, LLC 35 | P a g e
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flash for 100,000 shares then this is an offer to watch and keep note of. So what does it mean when there are 100,000 shares on the offer and 200 on the bid? It means that the stock will probably trade lower. Remember to keep note of these offers and to remember the levels of where they are at. If this big offer gets filled and holds then that means the stock will probably trade lower. If it lifts, then it is probably strong. You should also notice what happens to the stock when the big offer is placed. Finally, a big offer is when there is an offer that is noticeably bigger than all of the other offers, usually over 10,000 shares in size, but remember that all of this is relative to what the other offers have been showing and the volume in the stock. What do you do when there is a Big offer? When you see a big offer then you usually want to step in front of that offer and exit if it starts to decrement (or decrement quickly) or lifts. Also, keep in mind your real risk and what the underlying offers are doing. When a big offer lifts then there will be more slippage than if a regular offer lifts and you should factor that into your trading. When there is more size on the offers than there are bids then it usually indicates that the stock should trade lower. When you see these big offers you usually want to get in front of them by 1 cent because you will probably not get filled at the same price of the big offer due to FIFO, first orders in first orders out, which means the first order at that price will get filled. Finally, the exit of these big offers would be if it starts to decrement (or decrement quickly) or lifts.
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FTNT shows a big offer at $25.15 of 98,300 shares What does a Big offer look like on the Level II? Big offers are very easy and simple to spot on the Level II. They stick out like a sore thumb. If you see a few offers for 200 shares then one offer for 50,000 then that is the big offer. It would look like this: 2 arca 40.40 500 NYSE 40.41 BIDHITTER HOLDINGS, LLC 37 | P a g e
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1 nsdq 40.42 In the example above, the big offer is at $40.41 showing 50,000 shares in size while the other offers are showing 100 and 200 shares. Like I previously stated, this is easy to spot and should be noted when spotted. Flash orders Flash orders are when big offers are flashed at a price and disappear. This usually happens when the order is hidden but sometimes shows or if they want to see what happens to the stock when a big offer is being placed. These orders can sometimes be fake so you would have to keep track of the prints to see what happens at that price it flashed at. Keep note of these prices and note the size of the flash offers. It is the same thing as a big offer except it is just flashing in the level II. Watch and take note how the stock reacts to these flash orders. Big Orders stepping down/up Sometimes when there is a big order on the bid or offer it will just stay there and wait to get filled. Sometimes these orders will step up in price or down in order to get filled. When you see a big order you usually want to step in front of it, follow the order and exit if it lifts/drops or decrements. This is a simple trade that can be very profitable. When you spot a big bid you usually want to step in front of it and exit if it drops or decrements quickly. Sometimes that big bid will get hit for some stock and the stock will trade higher. Sometimes that big bid will step up on the bid by a few cents in order to get filled. You want to step in front of these orders and follow them until they get filled. Once they get filled you exit. Simple right? When a big bid continues to get hit for size you have to take note of how quickly it did and at what prices. You usually want to follow these big bids and exit if they drop/decrement. When a big bid is filled and drops then you usually want to be out of your long position (maybe enter short?) because it indicates that the stock was just hit for size and will probably trade lower. The same thing goes with big offers. You usually want to step in front of them and follow them until it lifts or decrements. You want to follow these orders because it is what the institutions are doing and they dictate where the stock is going to go. If there is a big offer, gets hit for some size, then steps down, then that means the seller wants to get rid of the stock even if it’s at lower prices. If the big offer then gets filled and lifts then you should exit your short position (maybe enter long?) because it shows that there is more demand for that stock at that level. BIDHITTER HOLDINGS, LLC 38 | P a g e
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What is Decrementing? Decrementing is when a bid or offer is reduced in size. This usually happens when the bid or offer is getting filled and the level II is representing that in real time. The faster a bid or offer is decrementing then the more important it is. You should take note of this and trade off of this information.
Before
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After What do you do when a Big Bid/Offer decrements? When a big order decrements then you should think about exiting the position, if you are trading in front of that big order. If it is decrementing quickly then you should really consider exiting the position because the chances of the order dropping/lifting are high. When a big bid decrements or decrements quickly, you should consider exiting your long position or consider entering a short position. Remember that all of your other indicators should line up for a higher probability trade. The same goes with a big offer. If the big offer starts to decrement, or decrement quickly, then you should considering exiting your short position or consider getting long.
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Sometimes there will be a stock on the verge of a break out. If there is a big offer at the whole number and it starts to decrement quickly then that can mean the stock is about to break out and might be a decent spot to enter long. The same goes with a stock that’s about to break down and there is a big bid. If it decrements, or decrements quickly, then you should consider exiting your long position or maybe enter short. Can big bids/offers be fake? Sometimes big bids/offers can be fake. You will know if they are real when the stock reaches that level, you start to see prints come through and the bid/offer decrements. You will know that they are fake if it gets to that price, it disappears, and it trades through that price with no volume. Traders sometimes put big bids/offers in order to see what the stock does in reaction. They also put these in these orders to fool other traders or algorithms. BIDHITTER HOLDINGS, LLC 41 | P a g e
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Held Bids and Held Offers Held Bids and Held Offers What are Held Bids and Offers and why are they important? Held bids and Offers are one of the more used indicators in tape reading. By spotting them you will be able to identify great risk/reward opportunities. Also, you will be able to spot great entries where you can literally risk 1 cent. This indicator is very important when reading the tape because it will present a lot of opportunities that you will not be able to see in the charts. Also, by spotting these you will find great entries for stocks you want to be in. During the open not much of the intraday chart has developed, so by spotting a held bid or offer and reading the tape you will be able to find great risk/reward opportunities, some of which you can’t spot on the charts. When a stock does a lot of volume at a certain price then we want to know this, keep track of it and trade around that price because that price is now a level. The more volume that is done at a certain price the more important the level is. This is very important information that we should keep track of intraday and trade around. Finally, remember that all volume is relative. This means that the volume has to be a lot relative to what has been trading at every price. What is a Held Bid? A Held Bid is one of the more used indicators in tape reading. By spotting a Held Bid you will be able to find a great risk/reward opportunity. A Held Bid is when there is at least 2-‐3 times more volume traded on the bid than it shows on the Level II or more than you expect and it holds. By expect, I mean traded relatively more volume than any other price. As previous stated, the more volume trading at the level and holding the more important it is. This indicator is great to use at the open and with stocks that are trending up to find great risk/reward opportunities with high probabilities of panning out. Held bids should always be considered when spotted whether you are long or short. If you are short already, this might be a reason to cover some or maybe even add more if the Held Bid drops. Just like the other indicators, you will need more than just this indicator in your favor to get in the trade. As previously stated, a Held Bid is when there is at least 2-‐3 times more volume traded on the bid than it shows on the Level II or than you expect and holds that price. Remember that it is all relative to how much has been trading at other prices, the more volume traded at that level and holding then the more important it is. You should also keep in mind the supply and demand dynamics of a held bid. When the Held Bid drops that means that the sellers are winning aka there is more supply than demand and the prices should see lower prices. In vice versa, if the bids hold that means the buyers are getting more aggressive aka there is more demand for stock at that price and it should see BIDHITTER HOLDINGS, LLC 42 | P a g e
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higher prices. Held bids can refresh and not show the amount of size they are buying or want to buy. What do you do when a bid holds? When a bid drops? When a bid is holding then you should get long. If a bid drops then you should not be long, possibly short depending how the stock is trading overall and what the other indicators are saying. It’s that simple! If there is a Held Bid then I should be long, repeat that statement to yourself 5 times and ingrain that into your brain since it should be instinct to react upon it. The reason you are getting long the stock is because someone is supporting it at that level. Also, you should pay attention to when a bid drops. If the bid drops then you no longer have a reason to be in the stock so you hit out if it (if you are long the stock at the Held Bid). If the bid drops then you should hit out of the stock, reevaluate, and gather information. Every trade you make gives you information about a stock, so use it to your advantage. This doesn’t mean that you should short it, remember that you should have all of your indicators in your favor if you’re looking to get into a position. If all of your indicators are in your favor and it is looking like the stock is going to head lower then it would be a good position to add to a short when the Held Bid drops, or initiate a short position if you are not already in a position. Again, with all the other indicators in your favor. Buying at the price where a bid is held is good technique for up trending stocks, it allows you to capture most of the up move while having a small amount of risk. Finally, keep in mind the supply and demand dynamics of a bid holding and dropping. If the bid drops then there is more supply, if the bid holds then there is more demand for the stock at that level.
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DANG held bid and drops, trades lower
DRI keeps holding the bid then dropping BIDHITTER HOLDINGS, LLC 44 | P a g e
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DRI trades lower What does a Held Bid look like on the Prints and Level II? On the Level II and Prints a Held Bid is easy to spot when you are 100% focused and reading the tape. As previously stated, a Held Bid is when there is at least 2-‐3 times more volume traded on the bid than it shows on the Level II or more than you expect and holds. By expect I mean traded more volume than any other price (relative). As previous stated, the more volume trading at the level and holding the more important it is. A Held Bid should look something like this (this is a basic example, so use this as the blueprint when looking for Held Bid): Let’s say LVS just went up from $45 to $45.25 and is in an uptrend. After that quick up move you see that some bids are hit and starts to pull back a bit. The bid now drops to $45.16 and at that price there is an NYSE bid for 200 shares in the Level II. You now see a bunch of prints for 100 shares at $45.16 (more than you expected and more than it has traded relatively to any other price there), but the bid never drops below that price. That is what you see when there is a Held Bid. A stock shows a certain amount of stock on the Level II at a certain price and prints at least 2-‐3 times that amount at that same price or at least 2-‐3 times more than you expected it to print at that price and holds. This means that there is a buyer there buying a lot of stock that he is not showing. You now notice that there is an underlying bid at $45.15, so the play would be you get long at $45.16 on a different ECN or long at $45.17 and you get out of the stock if the bid drops to $45.15. BIDHITTER HOLDINGS, LLC 45 | P a g e
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CRK is holding the bid at 19. Only showing a little bit of size but trading a lot more than its showing and has traded at the other prices.
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After
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What does a Held Bid look like on a chart?
TEVA holds the bid at 52
DANG holds the bid at 30 BIDHITTER HOLDINGS, LLC 49 | P a g e
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CRK holds the bid
CRK holds the bid at 18.50
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CRK trades higher
CRK trades higher
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TXN holds the bid on the open at 28.50, 28.80, and 29.10
TXN trades higher BIDHITTER HOLDINGS, LLC 52 | P a g e
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RIG holds the bid at 41.85
RIG trades higher BIDHITTER HOLDINGS, LLC 53 | P a g e
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Pot holds the bid at 39.90 and 39.95
Pot trades higher
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MLM holds the bid and holds higher
MLM trades higher BIDHITTER HOLDINGS, LLC 55 | P a g e
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What is a Held Offer? A Held Offer is one of the more used indicators in tape reading. By spotting a Held Offer you will be able to find a great risk/reward opportunity. A Held Offer is when there is at least 2-‐3 times more volume traded on the offer than it shows on the Level II or more than you expect and holds. By expect I mean traded more volume than any other price (relative). As previous stated, the more volume trading at the level and holding the more important it is. This indicator is great to use at the open and with stocks that are trending up to find great risk/reward opportunities with high probabilities of panning out. Held offers should always be considered when spotted whether you are long or short. If you are short already, this might be a reason to add some or maybe even cover some if the Held Offer lifts. Just like the other indicators, you will need more than just this indicator in your favor to get in the trade. As previously stated, a Held Offer is when there is at least 2-‐3 times more volume traded on the offer than it shows on the Level II or than you expect and holds. Remember that it is all relative to how much has been trading at other prices, the more volume traded at that level and holding then the more important it is. You should also keep in mind the supply and demand dynamics of a held offer. When the Held offer lifts that means that the buyers are winning aka there is more demand than supply and the prices should see higher prices. In vice versa, if the offer hold that means the sellers is getting more aggressive aka there is more supply for stock at that price and it should see lower prices. Held offers can refresh and not show the amount of size they are selling or want to sell. What do you do when an offer holds? When an offer lifts?
When an offer is holding then you should get short. If an offer lifts then you should not be short, possibly long depending how the stock is trading overall and what the other indicators are saying. It’s that simple! If there is a Held offer then I should be short, repeat that statement to yourself 5 times and ingrain that into your brain since it should be instinct to react upon it. The reason you are getting short the stock is because someone is selling it at that level. Also, you should pay attention to when an offer lifts. If the offer lifts then you no longer have a reason to be in the stock so you hit out if it (if you are short the stock at the held offer). If the offer lifts then you should hit out of the stock, reevaluate, and gather information. Every trade you make gives you information about a stock, so use it to your advantage. . If all of your indicators are in your favor and it is looking like the stock is going to head higher then it would be a good position to add to a long when the Held Offer lifts, or initiate a long position if you are not already in a position. Again, with all the other indicators in your favor. Shorting at the price where an offer is held is good technique for down trending stocks, it allows you to capture most of the down move while having a small amount of risk. Finally, keep in mind the supply and demand dynamics of
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Tape Reading 101
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an offer holding and lifting. If the offer lifts then there is more demand, if the offer holds then there is more supply for the stock at that level. What does a Held offer look like on the Prints and Level II? On the Level II and Prints a Held Offer is easy to spot when you are 100% focused and reading the tape. As previously stated, a Held Offer is when there is at least 2-‐3 times more volume traded on the bid than it shows on the Level II or more than you expect and holds. By expect I mean traded more volume than any other price (relative). As previous stated, the more volume trading at the level and holding the more important it is. A Held Offer should look something like this (this is a basic example, so use this as the blueprint when looking for Held Offer): Let’s say GMCR just went down from $52 to $51.75 and is in a downtrend. After that quick down move you see that some offers are hit and starts to pull up a bit. The offer now lifts to $51.86 and at that price there is an NYSE offer for 200 shares in the Level II. You now see a bunch of prints for 100 shares at $51.86 (more than you expected and more than it has traded relatively to any other price there), but the offer never lifts above that price. That is what you see when there is a Held Offer. A stock shows a certain amount of stock on the Level II at a certain price and prints at least 2-‐3 times that amount at that same price or at least 2-‐3 times more than you expected it to print at that price and holds. This means that there is a seller there selling a lot of stock that he is not showing. You now notice that there is an underlying offer at $51.87, so the play would be you get short at $51.86 on a different ECN or short at $51.85 and you get out of the stock if the offer lifts to $51.86.
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Tape Reading 101
Josecasanova.com + Tim Ungacta
What does a Held Offer look like on a chart?
FMCN holds the offer at 18 and trades lower
FSLR holds the offer at 50.60 and lifts
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Tape Reading 101
Josecasanova.com + Tim Ungacta
FSLR trades higher
HAL holds the offer at 34.28 and 34.20 then briefly trades lower
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Tape Reading 101
Josecasanova.com + Tim Ungacta
HAL holds the offer at 35.65, 35.40 and 35.20 trades lower
MJN holds the offer at 73 and trades lower
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Tape Reading 101
Josecasanova.com + Tim Ungacta
GRPN holds the offer at 30, lifts and briefly trades higher. It then goes back to 30, holds the offer and trades lower. What are “good” tape reading stocks? Stocks that tend to be good tape reading stocks have the following characteristics: are going to be active during the day and in play. You can tell which stocks these are because they are moving in the premarket with more volume than usual, gapping up or down, or have news. These stocks are the ones you should actively be trading because they will present to you high probability trades and have a cleaner tape to read than non active stocks. Like I said earlier, these stocks are stocks that have news, are gapping up or down, have a lot of volume, have tight spreads, and are volatile enough to trade. They can also have a nice technical setup that will make the stock move. In play stocks are stocks that have fresh news, are gapping up or down, have a lot of volume, have tight spreads, and are volatile enough to trade.
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Tape Reading 101
Josecasanova.com + Tim Ungacta
How to get better at tape reading It takes time. Every day that you watch tape adds more experience. Tape reading is not something you learn over night but something that you continue to learn day by day after you know the basics and foundation. The more experience you have, the better at tape reading you will be. There is no ultimate master tape reader status that you will achieve because you can only get better day by day... even when you think you’re an expert. Boosting your experience and learning curve There are a few ways to boost your experience and shorten your learning curve. You can start by reviewing your daily trading tape, allowing you to review your trades without the emotions of the moment. Also, at Bidhitter.com we offer a Tape reading video archive of in play stocks. This is all raw and unedited video of 4 level II boxes with prints and 8 charts, 2 per box. By watching these videos in your spare time you will shorten the learning curve. Putting it all together Now you should know the basics of tape reading, but remember that it is not something you can learn overnight. You must practice and practice your tape reading stills day in and day out if you want to improve. You should put all of the “indicators” we talked about above together when reading the tape. Use the Level II and prints to see what is happening with a stock. Spot big bids and offers and trade with them along with held bids and offers. Finally, you should also use tape reading along with charts and market psychology for higher probability trades.
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