reading the tape 101 - learn how to read the tape for day trading

I N T R O D U C T I O N T O R E A D I N G T H E T A P E

W W W . B I D H I T T E R . C O M

B I D H I T T E R H O L D I N G S , L L C

Reading The Tape 101

Copyright 2012 BIDHITTER HOLDINGS LLC

http://www.bidhitter.com/

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R E A D I N G T H E T A P E 1 0 1

Introduction


Introduction


About me Actively Day Trading since 2007 Traded for multiple prop desks in Miami and NYC Head of training and new traders for Miami Desk Became head trader after 3 months

What to expect To learn the basic foundation behind tape reading Do not expect to become an expert instantly Learning curve, do not get frustrated You will get better everyday you watch tape

Introduction


What to do after watching it

Read the book that came with it

Re-watch DVD

Watch tape from Tape Reading Archive and/or live market

Email me if you have any questions

Contact information: [email protected]

Introduction



What Is Reading The Tape?



Art of studying pure price action in real time based on the Level II box.

Gauge psychology and imbalances in supply/demand

Leading indicator

See real time where there is buying/selling at a level

Improve efficiency, risk/reward, and catch more moves

Helps you lower risk



Tool of trading veterans

Gives you an edge over chart traders

Brings consistency to your trading

Shows available plays that charts don’t

Can determine where a stock is going to go


What Tape Reading Is Not

Not a trading system

Not buy or sell signals

Not something you learn overnight

Not something that will make you instantly profitable


How Does Tape Reading Give You An Edge?

Real time indicator, not based on past data

Reading real-time order flow

Go with the flow

Great entries, lower risk

Art that was around before charts

Edge over algorithms and HFTs


What Is On The Tape That’s Not On The Chart?

See what active buyers and sellers are doing in real-time

Notice important levels that there are big battles

Can follow buyers, sellers, and/or certain patterns

Get a feel for the market

Charts are based on past data


Tape Reading is an art, not a science

Tape reading is not a science

Can’t just read a book on it and become an expert

Something you learn over long observation and personal experience

Basics are simple

You will get better over time


Tape reading affects efficiency with entries & exits

Find great entries with low risk that aren’t shown on the charts

Get in front of real buyers and sellers

Spot reasons for exits that are not on charts


Tape reading affects efficiency with entries & exits

GMCR Example

Accumulation not shown on chart in real time


How does tape reading it lower risk?

Spot buyers/sellers and get in front of them

Follow the big money

Get out if the big money stops

Can’t see on charts

Not just getting in a random prices, but real levels


How does tape reading it lower risk?

ASTM Example


How does skill at tape reading improve understanding chart patterns?

You will be able to see the supply and demand dynamic in real time

Adding it all together to gain an edge

Example from GMCR

See what buyers and sellers are doing at certain chart levels

See how patterns develop on the tape to spot if it is strong or weak


How do you improve your tape reading skills?

Takes time

You will get better every day you watch tape

Watch video of your trading

Bidhitter.com’s Tape Reading Video Archive

Easier to spot stuff on tape when not in a trade or trading

Speed up the improvement process by watching your recorded trading video after the close and BH’s Video Archive


Trading the open with only reading the tape

Charts haven’t developed first few minutes of open Edge is on the tape Intraday traders make most of there money on open and

close Most volume on open Spot levels the charts don’t show Can spot and follow buy/sell orders from institutions on

the open Real time order flow of a stock to follow


Predicting where the chart will go

Find key levels that a lot of volume has been done off

See how price reacts at certain levels

Able to hold for larger moves while keeping risk low

Able to spot an order and follow it

Going with the big money and following them


Quotes From A Tape Reading Great

Jesse Livermore

“A battle goes on in the stock market and the tape is your telescope. You can depend upon it seven out of ten cases.”



Level I & Level II


What is Level I?

What Does Level 1 Mean? A trading service consisting of real-time bid/ask quotes for securities trading on the stock market.

Investopedia explains Level 1 Basically, this just consists of real-time quotes. Also known as Level I.

-Investopedia.com


What is Level II?

What Does Level 2 Mean? A trading service consisting of real-time access to the quotations of individual market makers registered in every security.

Investopedia explains Level 2 This allows you to watch the trades being executed right in front of you. Also known as Level II.

-Investopedia.com

Advanced Level I


Level I and II

“Reading The Tape” refers to reading the Level I, Level II, and prints

Level II shows us who is willing to bid and who is willing to offer at what price and how much

Shows you the real time order flow See the open orders (Level II) and trades that have been

executed (Prints) Prints show if trades have been made on bid, offer, or in

between Level II are the open orders that are being shown


Level I and Level II Box


Level II Box

Grey = Level I

White = Stock symbol and position

Green = Bids

Red = Offers

Purple = Prints


Level II Box

Level II shows the open orders

Offers

Best price people are willing to sell

Above lowest offer are underlying offers

Bids

Best price people are willing to buy

Below highest bid are the underlying bids


Level II Box

Bids Size times 100 shares Exchange Price

Offers Size times 100 Shares Exchange Price

Prints Exchange Price Shares times 100


Level II Box

Highest Bid

$35.88

Lowest Offer

$35.91

Spread is the difference between the bid and the offer

3 cents


Level II Box

Watch spread of stocks when trading

Watch underlying bids and offers to measure real risk

There are also hidden orders not being shown in level II

Underlying bids/offers show you how strong/weak stock is


Real Risk

Underlying bids/offers show what your real risk is

Shows where you are able to exit the stock if it hits your exit price

Use this to calculate your real risk/reward


Level II Box



Prints


What are the Prints?

Prints are an important indicator

Prints are each transaction or trade

Can be on bid, offer, or between both

Shows which exchange it came from, size, and price

Shows where the stock is trading at and last transaction


What are the Prints?

Prints are important piece of reading the tape

The prints are what the old school traders (back in the early 1900s) used to determine the strength and weakness of a stock.

Able to see the strength or weakness and where there are buyers/sellers at certain prices


Prints

Prints Green Prints

Traded on Offer Red Prints

Traded on Bid White Prints

Traded between offer and bid Highlighted Prints

Through the market Don’t pay much

attention, only when frenzy they appear


Prints

There is a buyer for every seller and seller for every buyer

Common mistake for new traders

“if printing red they are selling”

“if printing green they are buying”

WRONG!


Prints

Last traded 500 shares on the offer at $35.91

Means someone paid/sold at the offer for 500 shares at $35.91

Before that $35.91 traded 100 shares on the offer


Using Prints as an indicator

Shows you where the stock is currently printing and with what size

Shows you where volume is being done and important levels

Remember how much volume is done at each level

Always gathering information from the prints

Can spot where big players are and follow patterns by how the prints are printing


Printing repeating on the bid, repeating on the offer

Keeps printing on the bid at lower prices Sign of weakness

Keeps printing on the offer at higher prices Sign of strength

Continues to print on the offer? Someone really wants the stock and are aggressive to pay the offer

and spread Not willing to bid for the stock, waiting/hoping to get hit

Not always the case, but with experience you will be able to know the difference


Big Prints

Stock continues to trade 100 and 200 share lots at a certain price then see a big print for 100,000 shares at the same price

Usually institutions Most of the time they dictate order flow since they have more money

than you

Clue to what they are doing, pay attention and remember it

That 100,000 share print at that price is now important


Big Prints

If it continues to trade at that price and bids hold then it is strong, if bid drops then probably going lower

If it continues to trade at that price and offers hold then it is weak, if offers lift then probably going higher

Watch the prints and see how they react to that price and size

Big prints are relative to the amount of volume being traded

Also to the amount of shares traded per price


Big Prints

Usually sticks out compared to other 100 share prints and current volume traded

Sometimes means it might be the end of an order being filled by institutions/algorithm


Big Prints


Big Print and Big Print Higher

Important indicator, indicates the stock is about to trade higher

Example: Stock trading at $50

Big print of 100,000 shares at $50

Trades higher

Big print for 125,000 at $50.25

Big institutions willing to get more stock higher with size

Notice and pay attention, bullish indicator


Big Print and Big Print Lower

Important indicator, indicates the stock is about to trade lower

Example: Stock trading at $20.50 Big print of 150,000 shares at $20.50 Trades lower Big print for 225,000 at $20

Big institutions willing to get rid/short more stock lower with size

Notice and pay attention, bearish indicator


Speed


Each stock trades with a certain rhythm and pattern

Not all stocks are the same, your job is to recognize the pattern

Prints fast – important

Prints slow – not that important

When a stock is printing quickly on the offer then prints faster – bullish

Indicator showing buyers are getting more aggressive and paying for stock

Can mean its about to break out if its at a resistance level or buy order about to get filled

Speed


When a stock is printing quickly on the bid then prints faster – bearish

Indicator showing sellers are getting more aggressive and hitting the bids

Can mean its about to break down if its at a support level or sell is order about to get filled

Notice if offer steps down and gets taken quickly

Means there is demand at that price

Notice if bid steps up and gets taken quickly

Means there is supply at that price

Speed


If an offer steps down, lifts and quickly prints on the offer then it means the stock is strong and offer is being taken—buyer really wants stock

If an bid steps up, drops and quickly prints on the bid then it means the stock is weak and bid is being hit—sellers in control

Stock slows its printing then might not be in play at the moment

Doesn’t print much then probably not in play/illiquid and should move on

Volume


Watch, notice, and remember how much volume is done at certain prices Very important when reading the tape/prints

Unusual amount of volume done at a certain price then it becomes important Important level to note

Rule of thumb: More volume done at a price the bigger the move that is expected

Volume


Volume is all relative to: How much the stock has traded How much you expected to trade at that price via Level II How much volume is done around the level

Just because a stock does a bunch of volume and trades up doesn’t mean you should be long

Combine the level with charts and what the tape has been telling you

Amount of volume done at a level gives you an idea of how much it should move

Volume


Example: Stock trades 300,000 shares (relative to overall volume) in a 10 cent

range Breaks out of range, can expect a 25 cent move

Stock trades 3,000,000 shares (relative to overall volume) in a 10 cent range Breaks out of range, can expect a one point move

Don’t be stubborn and wait if the stock doesn’t do what you expect

Amount of volume done at a level gives you an idea of how much it should move away from it

Big Buyer with a refreshing ECN


Refreshing ECN: Shows a few 100 shares on ECN at a price and refreshes to show more size after it

has been filled at same price

Example of a big buyer: Bid is $50 and offer is $50.10 See a bunch of red prints on the bid for size (remember relative volume) at $50

and the buyer doesn’t drop

Notice how much they are buying If he buys a bunch on the bid, refreshes, and holds the bid then it

can be a good entry for a long with stop if he drops (if everything else is in your favor) Great risk/reward setup



Example of refreshing ECN: BATS on bid at $30 and they’re showing 100 shares

Notice a bunch of prints at $30 (over a thousand shares) and he continues to hold

Buyer is hiding his size and trying to accumulate stock

Can get long there with stop if he drops

Follow the refreshing ECN too



Sometimes there will be a big buyer at a price (say $50) and they drop the bid for 5 cents then rebids the price (back to $50) (Advanced)

Games they play to shake people out

Should always follow plan if it was to hit out if buyer drops

Can always reenter with stop below the move

Big Seller with a refreshing ECN


Refreshing ECN: Shows a few 100 shares on ECN at a price and refreshes to show more size after it

has been filled at same price

Example of a big seller: Bid is $25and offer is $25.10 See a bunch of green prints on the offer for size (remember relative volume) at

$25.10 and the seller doesn’t lift

Notice how much they are selling If he sells a bunch on the offer, refreshes, and holds the offer then it

can be a good entry for a short with stop if he lifts (if everything else is in your favor) Great risk/reward setup



Example of refreshing ECN: ARCA on offer at $60 and they’re showing 100 shares

Notice a bunch of prints at $60 (over a thousand shares) and he continues to hold

Seller is hiding his size and trying to accumulate stock

Can get short there with stop if he lifts

Follow the refreshing ECN too



Sometimes there will be a big seller at a price (say $70) and they lift the offer for 5 cents then reoffers the price (back to $70) (Advanced)

Games they play to shake people out

Should always follow plan if it was to hit out if seller lifts

Can always reenter with stop above the move

Big buyer/seller drops or lifts


If we notice a big buyer/seller and we are in the opposite side of them then we exit assuming it will go against us

Example:

You’re long AMZN

Notice a big seller

Exit thinking it goes down

If they lift, then you can reenter long since they’re done selling

Same goes with the opposite

Isn’t the only reason to get in/out of a trade, make sure you have other indicators in your favor too

Big buyer drops


Big seller lifts


Hidden buyers/sellers


If the bid is at $50.10 and the offer is at $50.20 but you notice white prints $50.12 continuously.

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.

Hidden buyers/sellers


Same goes for bid.

If you notice that the bids step up to $50.12 and they get taken immediately then this means the seller is willing to sell at whatever price you are buying at and it is a bearish signal.

This will present a great risk/reward setup.

Hidden buyers


Probabilities


Indicators mentioned previously are usually reliable Trading is a game of probabilities Indicators can be false sometimes Must have more indicators in your favor, not just one More indicators in your favor = higher probability of

trade working Have multiple in your favor for a trade, including

technicals, to spot high probability trades with good risk/reward ratios

Using Prints and Level II Together


Reading the tape is using the prints and level II together

Using level II you see how much they want to show

Prints show you what they are actually doing

Have an edge over most traders

Using Prints and Level II Together


Be able to determine the amount of size you can use and see your REAL risk

Advantage to spot algorithms/HFTs

Can see and follow a buy/sell order by the trading pattern

Using both together will provide great opportunities that you won’t see on charts

What different prints means and what are some bullish and bearish prints


Different prints mean different things

Prints are your edge

Will show you if a stock is strong or weak and you use this information to develop a plan

What different prints means and what are some bullish and bearish prints


Reminder:

1 ARCA = 100 shares on ARCA

10 ARCA = 1,000 shares on ARCA

100 ARCA = 10,000 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)

Bullish and Bearish Prints Examples


The bid shows 10 ARCA and prints 60k on the bid at

the same price and holds Bullish

The offer shows 10 ARCA and prints 60k on the offer at the

same price and holds Bearish

The bid shows 70 ARCA, prints 9k on the bid, and refreshes Bullish

The offer shows 70 ARCA, prints 9k on the offer, and

refreshes Bearish

The bid shows 70 ARCA, prints 7k on the bid, and then the

bid steps higher Bullish

The offer shows 70 ARCA, prints 7k on the offer, and then

the offer steps lower Bearish

The offer shows 70 ARCA, prints 7k on the offer, and then

the bid steps higher Bullish



The bid shows 70 ARCA, prints 7k on the bid, and then

the offer steps lower Bearish

The bid shows 5 ARCA, prints 7k on the bid, drops, then rebids at

the same price Bullish

The offer shows 5 ARCA, prints 7k on the offer, lifts, then steps

down to the same price Bearish

The bid shows 60 ARCA, prints 6k on the bid, drops, and the offer

steps down lower than the previous bid Bearish

The bids get hit quickly and drop, moving the price lower Bearish

The offers get taken quickly and lift moving the price higher Bullish

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 Bullish overall but bearish for that price



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

Bullish overall but bearish for that price

Big print and the next prints are higher Bullish

Big print and the next prints are lower Bearish

Big prints and big prints higher Bullish

Big prints and big prints lower Bearish

The bids are tested and holds Bullish

The offer is tested and holds Bearish


Bidding, Offering, Overlapping, And Sweeping


What is Bidding and Offering?


Above, It shows BID 1,000 DANG, which means you are bidding 1,000 shares for DANG

Bidding means that you are buying on the bid.

Offering means that you are selling on the offer.

They are limit orders Purchase the stock at the price you

want it at Should bid or offer most of the

time when you are entering a trade



Above, It shows OFFER 1,000 DANG, which means you are offering 1,000

shares of DANG.

Should always bid/offer wider spread stocks

Doesn’t have to be at bid/offer.. Can go between spread

Will save you money over your trading career

By providing liquidity, it lowers your commission



Above, It shows OFFER 1,000 DANG, which means you are offering 1,000

shares of DANG.

Helps give you patience

Puts you in a position of strength

Have patience to wait for the fill

Should bid/offer when a stock isn’t going to move right away very quickly

What is sweeping?


Market order that will limit your entry

Use when you want to get in or out quickly

Difference between market order?

Limits the price you will get filled up to (mine is set 10 cents from market)

Have more control with your price entry

What is sweeping?


Great for illiquid stocks that you want to get in/out of quickly

Some algorithms know you are using a market order and give you bad fills

Useful for stocks that are about to break out or down

Reduces slippage

Makes your commission and trade more expensive since removed liquidity from the market

What is sweeping?


Market orders fill your order regardless of price

Sweep orders fill you up to XX amount away from offer/bid you wanted

Better than market since it gives you control—always have to be in control when trading

Should always use when you want a stock RIGHT NOW

When to bid/offer VS sweeping?


Should always try to bid or offer stock, both entry and exit

Sweeping is when you want to get in/out very quickly

Bidding and offering is when the stock is not going to move in the direction right away

Sweep when your bids/offers aren’t getting filled

Sweeping is good for momentum trades

Use your judgment when to use them

How does bidding/offers lower your cost?


Two ways

Providing liquidity to the market so you receive a rebate—lower commission

Better prices

No slippage

This adds up over a career

Hidden Orders and Different ECNs


Sometimes you won’t get filled on a certain ECN

Hidden orders are orders that are hidden from others

Try using a different ECN, sweep, or hide your order

Hiding orders do not show the algorithms or other traders your orders

Orders are filled FIFO, First In First Out

Huge order at a price? Step in front of it or use a different ECN to get filled

What is Overlapping?


When your put your offer below the best bid by a certain amount in order to hit the bids up to that certain price

When you put your bid above the best offer by a certain amount in order to pay the offers up to that certain price Shows that you want to buy 1,000 shares up to

$33.55. Order should get filled up to 54 cents just by looking at the level II

Overlapping


Used when you have to flip or want to get filled up to a certain amount

Pretty much same as the sweep key but with more control.. Removes liquidity

Would use to make sure you get filled with all the available stock up to that price

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

Shows that you want 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.

Things to consider when sweeping, bidding or offering


Consider the pros and the cons when you are deciding whether to bid, offer or sweep.

Ask yourself: 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?

Examples of when to sweep, bid or offer


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 Throw in your own bid, if the down move slows and keep a tight stop

If the stock has fallen quickly and there are bids Get in front of the bids with your own bid

If the stock has a down move and there is a refreshing ECN Get in front of the ECN with your own bid or match the bid with a

different ECN

Examples of when to sweep, bid or offer


If the stock is in a range and breaks out Pay the offer when the stock breaks out

You are long and the stock climbs quickly 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 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.

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.

You will notice how quickly your orders are getting filled, at what price, or if you 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, even at all. This means that someone is not willing to buy at that price so you

will have to lower your offer in order to get filled.

The speed of which you get your orders fill is important because it shows how fast people want to get in or out of a stock.



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 about to slow down.



This is all information that you are generating from your trades that you should take note of.

This will all give you more information about the stock than just the prints and level II.

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?



Big Bids

What are Big Bids and why are they important?


It is a bid that is way bigger than the normal bids that are shown and represent institutional size.

At least 10x larger than what the bids have previously been showing (Relative)

A Big bid is when there is a bid that is noticeably bigger than all of the other bids, usually over 10,000 shares in size.

They are institutional orders and you want to follow what institutions are doing

Institutions are the big money and are the guys that move stock prices

Big Bids Example


TXN shows 234,300 shares on the bid (NYSE) at $28.50.

Watch and keep note of that level to trade off.

Big Bids Example


What does it mean when there is 234,300 shares on the bid and 300 on the offer?

It means that the stock will probably trade higher.

Keep note of these bids and to remember the levels of where they are at.

Big Bids Example


TXN low was at that Big Bid of $28.50 and ended up going 1 point higher to $29.50

What is Bid Decrementing?


When a bid is reduced in size.

This usually happens when the bid is getting filled and the level II is representing that in real time.

The faster a bid is decrementing then the more important it is.

You should take note of this and trade off of this information.

What do you do when a Big Bid is Decrementing?


When a big bid 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 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.

What do you do when a Big Bid is Decrementing?


Sometimes there will be a stock on the verge of a break down.

If there is a big bid and it starts to decrement quickly then that can mean the stock is about to break down.

Might be a decent spot to exit long (or enter short).

Decrementing


rimmheldbidoffereverything have to edit

Bby vid-

bbyopen35c60cheldoffer40cheldbiddrop

chkbidbigflashorderdecrementingspeed

What to do when there is a Big Bid


You usually want to step in front of that bid and exit if it starts to decrement (to drop in size) or drops.

Keep in mind your real risk and what the underlying bids are doing

When a big bid drops then there will be more slippage than if a regular bid drops and you should factor that into your trading

What to do when there is a Big Bid


When there is more size on the bids than there are offers then it usually indicates that the stock should trade higher.

When you see these big bids you usually want to get in front of them by 1 cent You will probably not get filled at the same price of the big bid due to

FIFO, first orders in first orders out, which means the first order at that price will get filled.

Exit of these big bids would be if it starts to decrement (drop in size) or drops.

What does a Big Bid look like on the Level II


Easy to spot on Level II, stick out like a sore thumb.

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

2 edgx 30.16

Big bid is at $30.18 showing 100,000 shares in size while the other bids are showing 100 and 200 shares.



Remember, they should be noted when spotted

Example:

BBY is showing a big bid of 20,100 shares at $25.35 on NYSE




Example:

GMCR has a big bid of 41,500 shares at $51 on UBSS.




Example:

CHK is showing a big bid of 18,700 shares at $28.95 on NYSE



AAPL shows 63,100 shares on NSDQ, 63,100 shares on UBSS, and 19,900 shares on EDGX at the price of $540

Total of 146,100 shares at $540

Big Bid


bbyopen35c60cheldoffer40cheldbiddrop 35c drops


txnbidbid

txnopen50bigbidheldbid


chkheldofferliftsheldbiddropbigbid

krrefreshbuyerheldbiddropbigbidhiddensellerheldofferhiddenbuyer

Flash Bids


When big bids are flashed at a price and disappear.

This usually happens when the order is hidden.

Sometimes shows if they want to see what happens to the stock when a big bid is being placed.

These orders can sometimes be fake

Flash Bids


Sometimes they are 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 note how the stock reacts to these flash orders.

Flash Bids



Big Bids Stepping Up


Sometimes when there is a big order on the bid it will just stay there and wait to get filled.

Sometimes these orders will step up in price in order to get filled. Buyers are getting more aggressive.

When you see a big order you usually want to step in front of it, follow the order and exit if it drops or decrements.

This is a simple trade that can be very profitable.

Big Bid Stepping Up


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?

Big Bids Stepping Up


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?)

It indicates that the stock was just hit for size and will probably trade lower.

Can Big Bids Be Fake?


Sometimes big bids 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 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.

Can Big Bids Be Fake?


Traders sometimes put big bids in order to see what the stock does in reaction.

They also puts these in these orders to fool other traders or algorithms.



Big Offers

What are Big Offers and why are they important?


It is a offer that is way bigger than the normal offers that are shown and represent institutional size.

At least 10x larger than what the offers have previously been showing (Relative)

They are institutional orders and you want to follow what institutions are doing

Institutions are the big money and are the guys that move stock prices

Big Offer


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.

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.

All is relative to what the other offers have been showing and the volume in the stock.

Big Offer Example


LLY at $39 big offers show:

16,400 shares NSDQ

12,200 shares EDGX

7,000 shares NATX etc

Total of 52,700 on the offer

Watch and keep note of that level to trade off.

Big Offer Example


What does it mean when there is 52,700 shares on the offer and 3,700 on the bid?

It means that the stock will probably trade lower

Keep note of these offers and to remember the levels of where they are at.

Big Offer Example


CAT has a big offer of 48,200 shares at $113.07

Big Offer Example


FTNT has a big offer of 98,300 shares at $25.15

Big Offer


llydecrementing_reoffer

grpnipobigofferheldofferlifts

grpnipoheldofferbigofferdecrementliftsheldbid

What is Offer Decrementing?


When a offer is reduced in size.

This usually happens when the offer is getting filled and the level II is representing that in real time.

The faster an offer is decrementing then the more important it is.

You should take note of this and trade off of this information.

What is Decrementing?


What do you do when a Big Offer is Decrementing?


When a big offer decrements then you should think about exiting the position, if you are trading in front of that big offer.

If it is decrementing quickly then you should really consider exiting the position because the chances of the order lifting are high.

When a big offer decrements, or decrements quickly, you should consider exiting your short position or consider entering a long position.

Remember that all of your other indicators should line up for a higher probability trade.

What do you do when a Big Offer is Decrementing?


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.

Decrementing


llydecrementing_reoffer 39


What to do when there is a Big Offer


You usually want to step in front of that offer and exit if it starts to decrement (to drop in size) or lifts.

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


What to do when there is a Big Offer


When there are 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 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.

Exit of these big offers would be if it starts to decrement (drop in size) or lifts.

What does a Big Offer look like on the Level II


Easy to spot on Level II, stick out like a sore thumb.

Few offers for 100 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

1 nsdq 40.42

Big offer is at $40.41 showing 50,000 shares in size while the other offers are showing 100 and 200 shares.

Flash Offers


When big offers are flashed at a price and disappear.

This usually happens when the order is hidden.

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

Flash Offers


Sometimes they are 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.

Flash Orders



Big Offers Stepping Down


Sometimes when there is a big order on the offer it will just stay there and wait to get filled.

Sometimes these orders will step down in price in order to get filled. Sellers are getting more aggressive

When you see a big order you usually want to step in front of it, follow the order and exit if it lifts or decrements.

This is a simple trade that can be very profitable.



When you spot a big offer you usually want to step in front of it and exit if it lifts or decrements quickly.

Sometimes that big offer will get hit for some stock and the stock will trade lower.

Sometimes that big offer will step down on the offer 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 offer 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 offers and exit if they lift or decrement.

When a big offer is filled and lifts then you usually want to be out of your short position (maybe enter long?)

It indicates that the stock was just hit for size and will probably trade higher.



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 its at lower prices.

If the big offer then gets filled and lifts then you should exit your short position (maybe enter long?)

It shows that there is more demand for that stock at that level.

Can Big Offers Be Fake?


Sometimes big 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 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.

Can Big Offers Be Fake?


Traders sometimes put big offers in order to see what the stock does in reaction.

They also puts these in these orders to fool other traders or algorithms.



Held Bids

What are Held Bids and why are they important?


One of the most used indicators in tape reading

Spotting them will provide great trade opportunities

Risk can literally be 1 cent sometimes

Very important because it will provide opportunities that are not on the chart

Will give you great entries with low risk

What are Held Bids and why are they important?


During the open there isn’t much of a chart, can use held bids to find great opportunities---some you won’t be able to spot on the chart

When a stock does a lot of volume at a price you want to keep track and trade around that price because it is a level

Very important information to keep track of intraday

All volume is relative, has to be a lot of volume compared to what has been trading at every price

What is a Held Bid?


When there is at least 2 to 3 times more volume traded on the bid than it shows on the Level II or more than you expected and it holds that bid

Remember that all volume is relative The more volume at a level the more important it is Great to use on the open with a stock trending up – high

probability trade Should always be considered when spotted, whether long

or short

What is a Held Bid?


If you are short already, it might be a reason to cover some or even add if the bid drops

Need more than just this indicator in your favor for a trade

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 bid– all relative

The more volume traded at that level and holding then the more important it is.

Supply & Demand dynamics of a held bid


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 in control There is more supply than demand and the stock should see lower

prices

If the bids hold that means the buyers are getting more aggressive There is more demand for stock at that price and it should see higher

prices.

What do you do when a bid holds? When a bid drops?


Its simple

When a bid is holding you should get long Higher probability if other indicators are in your favor

When a bid drops you should not be long, maybe short Depends how the stock is trading and what the other indicators are

saying

Repeat this over and over and over again

Make it an instinct



Reason behind getting long a held bid? Someone is supporting it at that level

If the bid drops then you no longer have a reason to be in the stock so you should hit out of it If you are long the stock at the held bid and if that was apart of your

trade plan Gather information

Every trade you make gives you information about a stock, use it to your advantage

How were your orders taken? Quickly? Took a while?



Doesn’t mean you should short it if the bid drops Remember about the other indicators

If a stock looks like its going to go lower then a good position would be to add short when the held bid drops or initiate a position Again, with all the other indicators

Buying on a bid being held is a good technique for up trending stocks, great risk/reward

Same thing goes for adding/entering short on a held bid drop in a down trending stock, great risk/reward

Supply & Demand Dynamics of Bids holding and dropping


Remember

If the bid drops then there is more supply

If the bid holds then there is more demand for the stock at that level

Supply & Demand Dynamics of Bids holding and dropping


What does a Held Bid look like on the Prints & Level II?


Easy to spot when focused

Remember, a held bid is when there is at least 2 to 3 times more volume traded on the bid than it shows on the Level II or more than you expected and it holds that bid– volume is relative

Also, the more volume traded at a level the more important that level is



Example:

AAPL just went up from $400 to $400.25 and it is in an uptrend

The bid drops to $400.17 and at that price there is an NYSE bid for 300 shares on the Level II

AAPL has been trading about 600 shares per price level

You see a bunch of prints for about 1,900 shares total at $400.17 on the bid and never drops below that bid



Means there is a buyer there buying a lot of stock that he is not showing

You notice that there is an underlying bid at $400.16, so the play would be you get long at $400.17 on a different ECN or long at $400.18 and you get out of the stock if the bid drops to $400.17.

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.



Before, you see that $30 has about 1,500 shares at the bid

Stock has been trading a few hundred shares per price

Notice that it printed about 5,000 shares on the bid at $30 at this point



After, you see that $30 has about 200 shares at the bid

Stock has been trading a few hundred shares per price

Notice that it printed about 7,100 shares on the bid at $30 at this point and holding

That is a held bid



This upcoming reason is why you do not only get long because a bid is holding

DANG was weak and down 8.5% that day



It was weak, gapped down, weak bounces, and down trended most of the morning.

There was a held bid at the $30 level and it dropped



$19 is showing about 2,400 shares on the bid

Prints are showing that its printing a lot more than 2,400 shares on the bid and holding

Held Bid After


What do held bids look like on a chart?


Video Examples of Held Bids


19 crkheldbidheldbidbhigher

25c driheldbid

potheldbidaccumalation

rigbidholddrop

righeldbidaccumalation

rimmheldofferandbid


Video Examples of Held Bids


txn18cheldoffer10cheldbid

txn80cheldbidaccumalation

txnopen50bigbidheldbid

chkheldofferliftsheldbiddropbigbid


sbuxheldofferhiddensellerheldbid refreshseller

krrefreshbuyerheldbiddropbigbidhiddensellerheldofferhiddenbuyer



Held Offers

What are Held Offers and why are they important?


Same as held bid except with the offer

One of the most used indicators in tape reading

Spotting them will provide great trade opportunities

Risk can literally be 1 cent sometimes

Very important because it will provide opportunities that are not on the chart

Will give you great entries with low risk

What are Held Offers and why are they important?


During the open there isn’t much of a chart, can use held offers to find great opportunities---some you won’t be able to spot on the chart

When a stock does a lot of volume at a price you want to keep track and trade around that price because it is a level

Very important information to keep track of intraday

All volume is relative, has to be a lot of volume compared to what has been trading at every price

What is a Held Offer?


When there is at least 2 to 3 times more volume traded on the offer than it shows on the Level II or more than you expected and it holds that offer

Remember that all volume is relative The more volume at a level the more important it is Great to use on the open with a stock trending down–

high probability trade Should always be considered when spotted, whether long

or short

What is a Held Offer?


If you are long already, it might be a reason to sell some or even add if the offer lifts

Need more than just this indicator in your favor for a trade

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 that offer– all relative

The more volume traded at that level and holding then the more important it is.

Supply & Demand dynamics of a held offer


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 in control There is more demand than supply and the stock should see higher

prices

If the offer holds that means the sellers are getting more aggressive There is more supply for stock at that price and it should see lower

prices.

What do you do when a offer holds? When a offer lifts?


Its simple

When a offer is holding you should get short Higher probability if other indicators are in your favor

When a offer lifts you should not be short, maybe long Depends how the stock is trading and what the other indicators are

saying

Repeat this over and over and over again

Make it an instinct

What do you do when a offer holds? When a offer lifts?


Reason behind getting short a held offer? Someone is selling it at that level

If the offer lifts then you no longer have a reason to be in the stock so you should get out of it If you are short the stock at the held offer and if that was apart of

your trade plan Gather information

Every trade you make gives you information about a stock, use it to your advantage

How were your orders taken? Quickly? Took a while?

What do you do when a offer holds? When an offer lifts?


Doesn’t mean you should get long it if the offer lifts Remember about the other indicators

If a stock looks like its going to go higher then a good position would be to add long when the held offer lifts or initiate a position Again, with all the other indicators

Shorting on a offer being held is a good technique for down trending stocks, great risk/reward

Same thing goes for adding/entering longs on a held offer lift in a up trending stock, great risk/reward

Supply & Demand Dynamics of offers holding and lifting


Remember

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 & Level II?


Easy to spot when focused

Remember, a held offer is when there is at least 2 to 3 times more volume traded on the offer than it shows on the Level II or more than you expected and it holds that offer– volume is relative

Also, the more volume traded at a level the more important that level is



Example:

NFLX just went down from $68 to $67.75 and it is in an downtrend

The offer lifts to $67.89 and at that price there is an NYSE offer for 100 shares on the Level II

NFLX has been trading about 800 shares per price level

You see a bunch of prints for about 2,600 shares total at $67.89 on the offer and never lifts above that offer



Means there is a seller there selling a lot of stock that he is not showing

You notice that there is an overlying offer at $67.90, so the play would be you get short at $67.89 on a different ECN or short at $67.88 and you get out of the stock if the offer lifts to $67.90

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.

What do held offer look like on a chart?




Conclusion

How do you improve your tape reading skills?

Takes time

You will get better every day you watch tape

Watch video of your trading

Bidhitter.com’s Tape Reading Video Archive

Easier to spot stuff on tape when not in a trade or trading

Speed up the improvement process by watching your recorded trading video after the close and BH’s Video Archive


What are some good tape reading stocks?

Some good tape reading stocks are stocks that 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.


What are some good tape reading stocks?

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.


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 trading tape of your trading every day. This will let you see what trades you did in real time without the emotion

that is attached to it. Bidhitter.com Tape reading achieve Without those tools you would be subject to what you did during the

trading day and sometimes your mind clouds your judgment when you’re in a trade.

This wouldn’t allow you to see the clear picture the tape paints sometimes due to your position in a stock.


Boosting your experience and learning curve

Now you should know the basics to tape reading,

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 also use tape reading along with charts and market psychology for higher probability trades.


Putting it all together


We are going to go over some raw trading tape with audio commentary

Watch and follow what is being dictated about the tape


W W W . B I D H I T T E R . C O M

A N Y Q U E S T I O N S E M A I L M E A T J O S E @ J O S E C A S A N O V A . C O M


The End

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