Tape Reading for Futures is one of the fundamental principles of becoming a profitable trader. But the DETAILS of how to identify them are rarely taught.
Some traders are boggled with who to follow when trading. They struggle to identify the smart money due to the lack of information they have and are ultimately facing the inevitable risk of losing money.
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Tape Reading Course
All right, hello and welcome to this video on tape reading for, well actually it’s a tape reading tutorial for futures, but it applies to stocks too.
Tape Reading for Futures
So we’ve got a little higher high here. This is the point where you can see the Blue Line. Question is, will it continue to follow through to the upside or to the downside? And markets are moving faster than I can talk, so I’ll read again to see what’s happening. But in real life, I get started talking a little bit late. How would you determine that? That’s one of the big questions. Whenever you talk to a trading teacher, you should always ask them the question of, well, how do I determine whether you know this is going to happen or that’s going to happen? Tell me specifically, tactically, exactly, specifically give me the rules. So here’s one of the rules that I use.
Tape Reading Technique – Futures
I bring up a time and sales window which you see on the right side of the chart there. And with that, you can actually see each order that comes through the market. So now we are seeing not just the volume histogram at the bottom, which is limited; that shows you the total number of, in this case, contracts, because we’re looking at the NQ when the Nasdaq 100 futures. But we’re actually seeing each order and the volume of each order. Now, I’ve got that customized so that I don’t see any orders less than five contracts. I am not interested in anybody trading one, two, three or four contracts. So I’ve gone and filtered those out.
I’m only interested in a little bigger orders. I’m not interested in the amateurs here, that really means nothing to me. So I want to filter them out and I do. I’m only looking at trades for five contracts or more. And even there, obviously you’re going to get some amateurs. But as you can see, when we had the little breakout there, and this is a big problem, right? False breakouts; How do we determine whether it’s going to be a false breakout or if breakouts are going to follow through to the upside? So this is one of the solutions. This is one of the how-tos; by bringing the time and sales window and looking at what is the dominant direction, or I should say the direction of the dominant energy of the market.
Tape Reading & Market Tactics – Futures
You can also put bids and asks in there. You’ll see the bids and asks at the top – I really couldn’t care less about the bids and asks, these mean nothing to me. So I filter those out as well and I only look for the actual orders; the commitment of the money that the market participants are putting in because that I know they’re serious about. Bids and asks can be pulled and they can game the market that way. Therefore, that’s meaningless to me.
Find the Smart Money
Now, I want to know that talk is cheap. Actions speak louder than words. Bids and asks are talks, and actual orders are being filled. Those are actions, and that’s what I want to see. As you can see, that dominates the red here and it has, ever since the breakout, and we’ve got some decent-sized orders, nothing really big right here now. But at least, these are not people who are just trading with the very minimum accounts available. That’s not going to be your smart money people. We want people who have decent-sized trading accounts and therefore can afford to trade five contracts.
And remember, when they’re trading five contracts, that might not just mean that they’re trading five contracts on that trade. They might be sizing in. So they’re trading five contracts, and then they get in with another seven, and then another eight, et cetera. So keep that in mind as well. It doesn’t mean that their whole position is five contracts. So that’s part of the reason why I do that. Anyway, the mark is still going down here, so let’s take a stop. We’ve already seen this false breakout and let’s stop here and look at another example.
Market Analysis – Futures
So now we are coming down, you see the Blue Line below us? That’s support. So now the next question is, ‘is the market going to hold that support and bounce off? Or is it going to breakthrough?’ Well, again, the market’s moving pretty fast. But look at the time and sales window. So anything that’s over 20 contracts, I designate as a block order and that just means those are really big orders. Anyway, we broke through that support. Therefore, that support level no longer exists and you could see that we broke down below that. And you can tell that because, with price bars alone, you may not be able to see that. But when you look at the time and sales window, you can say, okay. So not only do we have a lot of sell orders, but there’s big volume in each one of those orders.
And we had those what they call block orders and look again, still red, red, red. There’s another block order that’s coming through at 25. We’re in another support level and let’s see what happens here. Now we’ve got some green block orders: 37, 20, 10, and 38. And so we’re getting some big orders, more green orders coming through and see, the market goes back up. And technically, basically now more block orders and the green side, the buy side. So the market’s not really breaking through that support level. Got a little below it, a few texts or whatever. But we’re holding it, holding a middle level. We’ve got some buying coming in here, some accumulation coming in. Hasn’t really pushed the market back up yet, but we are indeed seeing lots of buying, lots of buying, lots of buying, and large orders coming in.
Rules of Economics – Futures
You’re always going to get buying and selling because it takes both to make a market. Obviously, every time somebody buys, someone else has to be selling and someone selling, they’ve got to buy. And so there we go. Now by the way, when it’s light green like that in the time and sales, that means people are actually overpaying a little bit. That’s a sign that either they’re getting a little slippage, or they’re just being really aggressive on the buy side. When it’s Magenta, then they’re being a little aggressive on the short side. And they’re getting some slippage there. So there we go. You’ll notice it doesn’t happen necessarily right away on the spot, at the moment. That’s what is called an accumulation. People are taking positions, building along the positions.
And then we got another block order at 27. So that’s the smarter money. So to say, we’re back above that. What was the support level now? And we are coming back up and that accumulation now has turned into an actual reversal of the market direction.
Tape Reading Made Simple – Futures
So that’s how they do tape reading. That’s your tape reading tutorial for futures. And this is, basically, what I do and watch for it, especially at support resistance levels. This is how I primarily use it at support resistance levels and at swing highs and swing lows to determine whether the market will follow through, whether breakouts will follow through or whether they would fail and the support and resistance levels are going to hold or if the market’s going to fly right through them. So if you like the video, please understand that it’s free!
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Rubber Band Trade Strategy
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