The consolidated tape, also referred to just as the “tape” of a stock, is a list of every transaction over 100 shares that takes place in that stock. The tape displays the time of the transaction, the exchange or ECN the transaction took place over, or if it was in the dark markets, the exact price, and the size of the transaction.
Traders use the consolidated tape to help spot large buyers or sellers, and predict future price movement. Traders do this by watching for large surges of buying or selling showing up on the tape, and by watching for abnormally large transactions (usually transactions over 10,000 shares in size). A trader who successfully spots large buyers or sellers can take a position in the same direction as the large market mover, and piggyback on the momentum created. Finding trade entries and exits based on tape prints is known as “reading the tape”.
A tape may also show that when a stock reaches a certain price, a large trader steps in and either buys or sells at that price. Sometimes, when a large institutional investor only steps in at a particular price, the pattern may repeat several times. A trader can use this information knowing that the price the large trader steps in on is an area of support or resistance, and may provide an entry or exit for a trade.
A tape is also used to understand which markets are most active for a stock, and this will give a trader a better chance of being executed at the price he wants. For instance in a stock with a thick book, a trader may notice that BATS BYX exchange is printing very rapidly on the offer, but other ECNs are not. A trader may be able to get filled very quickly on BATS BYX, and may not get filled at all on other ECNs.
Having access to the full consolidated tape, and having direct market access from a brokerage so a trader can be executed at the best possible price is crucial to being profitable. At How We Trade, we would never trade without watching the tape, and we believe all traders should enjoy the same advantages we have. To be a trader with access to the tools used by professionals, enter your information in our sign up sheet and open an account with us today.
