Market News 8-31-23

News You Can Trade 📰

Members of the FOMC are fighting

Two stocks smashing earnings expectations

‘Magnificent 7’ Stocks See Big Mutual Fund Purchases

What To Do When The Market Pullsback

The Market 📚

Stocks made a hard u-turn higher after validating initial stages of bearish order flow. 

So we went from bearish to bullish in a heartbeat. Tough if you’re chasing price, glorious if you have a system for reading the tape.

Tape reading is a mysterious method of trading crafted in the early days of the stock market by the likes of Jesse Livermore, Richard Wyckoff and Humphrey B. Neill.

But to bring it forward for the modern trader here’s my definition. “Is the stock moving closer to or farther from a significant reference point?”

You might be thinking wow that sounds complicated, but trust me, you already know how to “read the tape.” Let’s think about when you’re in a trade. NOBODY on Wall Street knows how strong or weak that stock is at the moment better than you do.

You have a reference point. Your entry price.

Tape reading mastery is when you can do this before you’re in a trade. And that requires a system, a method, price action levels that you can rely on.

Levels that you monitor as part of your system. This could be the previous closing price, the previous high or low, or maybe a moving average. We have a very specific price level that’s a foundation of our system.

Here’s why this is critical. If you don’t pick a price that matters, one that is repeatable, then all price action will appear random. But if you have a Northstar, a significant point that says “I’m watching it from that price,” everything comes into focus.

When you combine order flow, and tape reading, trading becomes fun. Not because you can predict, but because you have a roadmap. You’re no longer lost.

PS: We often get asked about reading level 2 and tape reading. Yup. Sure it’s a method of very short term trading. It’s possible to do, but much harder with all of the algorithmic trading these days. I taught it for years. I no longer do. We focus on longer time frames.

If you want to dive a little deeper into the topic, watch this video.

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