Level 2, Tape reading

[Milos Randelovic 3]

After Thor’s webinar on tape reading I have read the book “Dark Pools” by Scott Patterson and listen the Chat with Traders Podcast with Aaron Fifield and the guest he had on the show name Sang Lucci.

From what I read and learned from these guys is that tape reading and level 2 are must know strategy for long term and consistent success. So far I haven’t understood and used much these tools but I’m planning to dive into.

Just want to see how many of you agree that this is something that is must know for success and how much of your trading strategy is based on these two indicators?

[Alastair 111]

For me yes.....more info here....https://forums.bearbulltraders.com/topic/1916-bookmap-for-learning-level-2-and-ts/?tab=comments#comment-14463

 

Note:  I said for me .....  Aiman has stated many times he does not use L2 or T&S.

I enjoy finding confluences to confirm my thesis.......T&S gives ENTRY......while L2 gives TARGETS.   They are just additional indicators.

New traders need to learn how to read/interpret the indicators they use. Unfortunately many senior traders do not teach some of the critical components of the indicators leading to long painful learning curves.

 

Edited September 16, 2021 by Alastair

[Bailey Nevener 83]

I use it, but you definitely don't need it.

In my opinion it is less important the higher the timeframe that you are trading on.

Edited September 8, 2021 by Bailey Nevener

[Milos Randelovic 3]

Thanks for your input.

I will definitely look at the bookmap video…

[Milos Randelovic 3]

Hi guys,

I have watched the bookmap videos and I have to say it is quite amazing. I was trying for a while to find out exactly how the order flow mechanics works and these videos explain pretty well.

While observing the time and sale this week I noticed that lot of transactions are made in between bid and ask. This would show up in white colour if you didn’t change that setting in DAS.. My question is:

1. How do you interpret these transactions. Bullish, bearish or even neutral. I’ve noticed that the higher prices stocks such as AAPL or TSLA have more inside transactions.

2. Who is allowed to be filled in between bid and ask. I certainly can’t. Is this only reserved for market makers?
 

I would appreciate your thoughts.

[Alastair 111]

Using my opinion and observations  I will reply with the following answers:

1a.  If L2 is bullish, T&S is bullish, Candle Sticks (i.e. 5min and/or 1 min) are bullish and volume on  5min/1 min is increasing over previous and you are at support (i.e. Thor's WHERE) look to pull trigger for longs.  U also should have plan for your target and partials. Stops behind the level or being aggressive a few cents behind the price level u observed the large order/transaction.

 

1b. Interpreting a bullish T&S: Aggressive bullish transactions are green (the default colors) orders, BUT has the price MOVED UP from the previous price level on the LARGE T&S tape display ?  If YES then bulls at that point in time (and for the next 5 seconds) are winning and it may continue.   This could be the start of the move or just a glitch in the MATRIX.....LOL.  U have to have the probability on your side, hence reason or need for selecting or observing the best WHERE (levels), Order Size on T&S, Candles etc. and using a STOP.

Extrapolate the Aggressive Bullish T&S scenario above, to the Aggressive Bearish scenario and a Neutral scenario on the T&S.  ...... Did the PRICE move in the direction of your bias after the aggressive order on the large T&S ?  This is the signal u need to observer on T&S.

 

2. Passive orders can get filled in between BID/ASK.  You can drop a passive order at any price as a limit order.  Passive orders do not move the price of the market, generally.  They could be called neutral.  Very large players can get permission to enter with PASSIVE limit/orders.  As an ex-banker during FOREX auctions for foreign currency, only staff and very large corporate customers of the bank had the privilege of using the mid-rate, i.e. in between the BID/ASK. I assume it is the same here,  as all banking processes are the same, they are just applied to different systems or flows of money in a capitalistic economy. 

 

Pension Funds are some of the largest institutional players and target certain stocks. So for APPL and TLSA I would assume that the PENSION funds, MM, super large players BUFFET, BEZOS transactions are done, sometimes in blocks (i.e. by Dark Pool exchanges), in between the bid/ask so they have minimum effect on market price, or after market close in the reconciliation, showing up in the candle chart at 8:00am.

 

When trading APPL and TLSA a independent/retail trader will then have to watch the white transactions and observe if the price moved up or down with/after large orders on T&S.  I personally and other SMB traders generally just watch the digits to the right of the decimal point for any changes on the large tape.   Tickers with extremely high institutional owners also have these characteristics.

 

@Milos RandelovicHope the above helped.  Prefer to voice chat to explain these concepts.

 

Edited September 29, 2021 by Alastair

[Milos Randelovic 3]

This is great Alastair,

Thank you so much for you time to explain this. I will need to spend some hrs in monitoring the tape so that I can correlate with the price action. This as everything else im trading requires time and lot of work to turn into real $.

 

[Alastair 111]

Comments from BBT Discord Channel which I think are relevant to this thread....see below:

SubZero — 09/30/2021
Thanks @Alastair! Will read through these posts.
BTW: I heavily use bookmap for orderflow and micro-trends (because i scalp quite a bit) and i cant seem to correlate the "inside" orders in DAS with what i see in bookmap

 

Alastair — 09/30/2021
Great, so u will be familiar with the concept of the AGGRESSIVE and PASSIVE orders from boookmap training.  So my logical reasoning, "Inside"  orders are LIMIT orders placed on the fly  using A.I. or script (BID + ASK / 2 rounded to 4 decimal places sometimes) so the trader hides his intention  and/or simply the institution is trying to get the best price as 2 cents makes a huge diff when  u are moving millions of shares.  They would not be seen in bookmap, as PASSIVE, they were placed and then absorbed/filled immediately by MM (too fast for ur eyes to see, but will be on T&S as WHITE).

Not sure how Bookmap represents/accumulates them after execution i.e. red/green balls.  I know DAS will look for the previous  AGGRESSIVE order and accumulate the number of shares of the passive order as that type of last aggressive order i.e. red or green.

Edited October 5, 2021 by Alastair

[Alastair 111]

Check this post for specific mechanical steps which I use to read/intrepret the tape.

It maybe helpful or it maybe a waste of time, either way read, digest, discuss and provide ur opinions.

https://forums.bearbulltraders.com/topic/1916-bookmap-for-learning-level-2-and-ts/?do=findComment&comment=22979