In this video you’ll learn tape reading price action trading strategies. I’ll demonstrate it using the S&P 500 E-minis. Tape reading Forex doesn’t work the same way because spot Forex shows tick volume and doesn’t trade through a central exchange.
You can definitely use this price action analysis for tape reading stocks and futures.
Enjoy this brief price action tutorial video about trading the tape, and consider adding it as a part of your current trading methodology.
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Welcome to this video on tape reading price action trading strategies. What we have here is the S&P 500 E-minis. It’s a 2 minute chart on the left and time and sales over on the right. And you see a couple of block trades just came across there. I have that set to be 50 contracts or more. And we just broke down through a support level here or previous low.
Here’s another block order over on the right, 150 contracts this time. Now I’m fast forwarding here, prerecorded this so that I could edit this down to a timely manner, because I always try to keep these videos under 10 minutes.
TAPE READING PRICE ACTION TRADING STRATEGIES
There’s some selling going on, block order 50, block order 155, sell, and then now you see some of the violet ones coming up, the colors there. Those violet colors meant that the orders came in at below the bid. So there’s more block orders selling, a 100 contracts, 292 contracts, and so again below that low on the price action where you can see the chart.
Now there’s another block order 400, again that’s, if it’s red, it is at the bid. And if it’s green, it’s at the offer, and you saw the violet, that’s below the bid, and if it’s light green, it will be above the offer. Those will show some dramatic, people willing to pay little more, or maybe they’re getting slippage, but you can see we got 3 big block orders there.
This is one of my favorite tape reading price action trading strategies.
Normally when I trade, the E-minis, I set the block trade at a 100. Ok, move forward here again to save some time. I added the volume list around at the bottom. Now we got a big volume spike here. And that below again. The low I put the black line on there, you can see breaking through resistance.
TAPE READING MADE SIMPLE
What’s happening here is we got a lot of selling coming in, look at all the sell orders there. And by the way I have set it up so it doesn’t print anything below 10 contracts. Couple more violet orders coming in, we making sure people are meaning people are really willing to even, get a slippage on those orders.
Now we’re coming back up. There are some green orders coming back down. Remember we got all these sell orders. Here is the point, of all these sell orders, there’s another block 50, another block trade at 200. And so now what they are doing is they are probably shorting into resistance here. They are thinking, okay we broke through support, we come back to resistance and so we’ll take this short here.
Right we fast forward again. Well guess what, now we broke up through that resistance and we have come back up. And now we got some of the light green prints there. So that means that they are trading above the offer. So now they are willing to get some slipperish there.
TAPE READING STOCKS
Price action has broken above that previous support. We got broke below it and now we broken back above it. That break out trade which is basically what probably a lot of those people are doing. They were trading a breakout trade to the downside. And it didn’t work. It failed. And so this is very typical.
BTW, even though I’m showing this using the S&P E-minis, this works well with tape reading stocks too (not spot Forex though).
This is why when I watch price action patterns, I watch it along with, price action in this case meaning watching the tape. This is called tape reading trading. You know there’s other aspects of tape reading.
At this point you could see that yes we’ve really reversed off of that bottom. And now what we are doing is we are breaking through a little resistance, the previous swing high, and as we do that, we got a block trade coming in here at the 76 contracts. And we are just continue to watch the tape, and see what happens.
USING VOLUME WITH PRICE ACTION AND TAPE READING TUTORIAL
Here’s another thing to consider when using tape reading price action trading strategies.
There’s a lot of buying coming in, lot of green. And again we are getting above this resistance level. One of the points here, as we fast forward again, is and now we’ve broken above resistance. And we got a block trade there, 57. And some more green coming in. see if we can hold this. But one of the points is that you notice we had a lot of big orders, oh we got another volume spike. Okay, that’s what we are looking for. So that’s what I was going to say.
But these volume spikes, this is where I look for exhaustion. And I look for people to get trapped. We saw the volume spike histogram on the previous low, and now we are seeing it here at this high. And I actually, you know the thing you might think is, well if we got the big orders coming in, big contracts, hundred contracts, 2 hundred contracts, we should trade in that direction. Not necessarily. Just because there’s people who trade with a lot of money, doesn’t mean that they are right all the time. They get stuck, they get trapped just as much as anybody else.
TAPE READING TRADING
My point is you can’t rely on only using this tape reading technique to trade with the smart money because the smart money doesn’t always make money. And the way they trade is you know rather sophisticated, so they might make money overall. But that doesn’t mean that they are right this time on this trade. They get faked out, they trade breakouts like this. See I don’t trade breakouts, and it’s for this very reason is because breakouts fail too often.
I actually look to fade the breakouts. I can use that using these tape reading price action trading strategies. We are looking for people to get stuck, people to get trapped, even the big traders, and trade against them. And these volume spikes on the histogram can really help you with that. That’s the time to look for those false breakouts. And that’s kind of the key here, the lesson today for this trape reading tutorial.
TAPE READING: LEARN HOW TO READ THE TAPE FOR DAY TRADING
But it’s not only that. You know a lot of people know that. Those are exhaustion bars there. I also want to see traders getting stuck. Because that adds to the probability that that breakout is going to fail. That’s getting in too late.
In my opinion if you are trading breakouts, you are paying retail. I like to get in before the breakout and pay wholesale. So don’t know about you but I’d rather buy low and sell high. Some people say buy high and sell higher. I totally disagree with that. Especially in today’s markets. You might have been able to get away with that years ago but not today.
BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.
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