We recently had discussions in the BBT chat room on how to read the tape or better described as interpreting the tape. This has led me to make this post and present my ideas and observation which may help in the discussion and make this critical excercise easier for traders. To help I have included an image below with a specific layout of DAS windows and 4 numbered focus points(FP). I have defined a simple 4 step mechnical process to interpret the tape and make a decision when to enter/exit a trade in the direction of a predetermined bias. The windows layout is rooted in trying to be logical and efficient for the physical process, minimize head/eye movement and a logical decision making process. The Layout a) Montage L2 top line is the potential future transaction, i.e. a crystal ball looking into the future b) T&S top line is a "large tape" of most recently executed transactions (note: deliberately on same eye level as L2) c) 1 min chart as close as possble to T&S and montage L2 (Note: BID/ ASk spread is on charts for easy visual reading with no lines across charts) The Focus Points (what to observe when price is moving into a S/R level which the trader previously marked on the chart) FP#1. - Select which price you prefer to observe, the BID or the ASK. No need to watch both. I watch the BID as it is physically closer to the T&S info. - Watch as price changes on this line, is the price change moving up, down or holding at a specific price point? - Only need to observe the change in the cents. - Verbally speak the value to yourself as it changes. - Is the price re-aquiring a specific price point? - Is the share size signifcant at that price point? - How much is the change in price? - Is it large/small for that symbol? FP#2. - Is the most recent transaction an aggresive BUY or an aggressive SELL ? - Did the price change up or down with last transaction compared to previous transaction? - Note the price changes for white transaction, they are also important. - What was the quantity of shares? FP#3. - What are the last 3 to 5 candle sticks communicating at this level which is drawn on chart? FP#4. - Increasing or decreasing volume? - What is the volume for each candle stick communicating? - What VPA patterns are being displayed in the volume area? Repeat FP#1 to FP#4 until ideal entry/exit is provided and/or everytime the price approches key levels marked on chart. Use key levels to add or partial. Blue Areas The areas will be in your peripheral vision. On montage you will observe if the pools of liquidity/LIMIT Orders/PASSIVE Orders are increasing or decreasing on the BID/ASK sides of montage. Observe if a ladder up/down is formed and the sizes. On T&S observe speed on the lower tape, blocks of small BUY/SELL flowing thru the tape. Generally try to have eyes centrally focused so you eliminate head and eye movement as you are trying to be as efficient as possible as the process can be a tiring exercise depending on intensity. BEARISH BIAS For a bearish bias the trader ideally would need to observe the montage level-2 price points holding then dropping, supported with T&S red transactions with dropping price points. Large BIDS parked on L2 lower down.(If green T&S transaction and dropping price expect a big flush) BULLISH BIAS For a bullish bias the trader ideally would need to observe the montage level-2 price points holding and then popping up, supported with T&S green transactions. Large ASKS parked on L2 higher up. Generally Market Makers will move the symbols price to genuine large pools of liquidity to achieve their own legal obligations and generate revenue as they have to make a profit for themselves. Market Makers like all companies have daily, weekly, monthly and yearly profit targets. BTW, You need to reduce the number of color bands in the Montage L2 from the default number to something that is more manageable. Too many flashes will distract your eyes. This a personal preference and should be explored by trader.