Tape Reading

What Is Tape Reading?

Tape perusing is an old technique that informal investors used to dissect the price and volume of a given stock. From generally the 1860s through the 1960s, stock prices were communicated over transmit lines on ticker tape that incorporated a ticker symbol, price, and volume. These advances were phased out during the 1960s with the rise of personal PCs and electronic communication organizations (ECNs).

Understanding Tape Reading

Ticker tapes were created in 1867 by Edward A. Calahan for the Gold and Stock Telegraph Company. Thomas Edison developed the primary viable stock ticker in 1871 that helped the market turned out to be more efficient. These machines were before long introduced across all major businesses as the primary means of price and volume dispersal.

Numerous renowned traders became well known by tape perusing, including Jesse Livermore who spearheaded momentum trading. Several books were likewise distributed about tape perusing, including Tape Reading and Market Tactics and Reminiscences of a Stock Operator. Many terms additionally stay in common use from that point forward, including ticker symbol, stock ticker, and expressions like "don't fight the tape" (importance don't trade against the trend).

Tape perusing in the long run became obsolete during the 1960s and 1970s with the rise of TV and PCs, yet the terms ticker symbol and stock tickers stay being used and traders utilize a considerable lot of similar techniques with more modern technology.

While the rise of personal PCs made outdated tape perusing obsolete, a large part of the phrasing of that time stays in the present trading vernacular, for example, "ticker symbol," "stock ticker," and "don't fight the tape."

Modern Tape Reading

Modern tape perusing includes taking a gander at electronic order books to break down where a stock price might be going. Not at all like stock tickers, these order books incorporate non-executed trades, which gives a higher level of detail into the market at some random time.

For instance, a trader might take a gander at a security's order book and see that there are large limit sell orders at a certain price level across numerous exchanges. This might demonstrate that the stock will experience critical resistance at these levels. The inverse might be true on the off chance that there are large limit buy orders below the current price, which could show strong support at a given price point and give a trader the confidence to buy realizing there's a price floor.

Numerous brokers give access to these order books as Level II quotes. In advanced cases, automatic traders might utilize the information while building trading algorithms. Interactive Brokers, for instance, gives a function called "reqMktDepth" that allows traders to stream order book data for analysis. These experiences can demonstrate very accommodating while creating modern trading calculations.

Features

• Tape perusing was the way that informal investors used to dissect the price and volume of a given stock before the technology was supplanted.
• While tape perusing was phased out during the 1960s, comparative strategies are utilized by electronic traders, and large numbers of the terms beginning from the time are still widely utilized.
• A stock's ticker symbol, price, and volume were sent over broadcast lines through ticker tape.