Day Trading Secrets: Learn to Day Trade with Tape Reading | Travis Rose | Skillshare

Day Trading Secrets: Learn to Day Trade with Tape Reading

Travis Rose, Financial Analyst & Trader

Day Trading Secrets: Learn to Day Trade with Tape Reading

Travis Rose, Financial Analyst & Trader

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14 Lessons (1h 42m)
    • 1. Preview

      2:22
    • 2. Introduction

      1:39
    • 3. Level 1 vs. Level 2

      2:48
    • 4. Supply & Demand

      5:32
    • 5. Time & Sales

      2:40
    • 6. What is Tape Reading?

      1:59
    • 7. The Importance of Tape Reading

      2:37
    • 8. Hidden Buyers

      10:32
    • 9. Hidden Sellers

      8:37
    • 10. Fakeouts & Manipulation Tactics

      5:08
    • 11. Identifying Reversals with the Tape

      8:17
    • 12. Tape Reading Practice #1

      14:52
    • 13. Tape Reading Practice #2

      12:23
    • 14. Tape Reading Practice #3

      22:42
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About This Class

Day Trading Secrets: Learn to Day Trade with Tape Reading access also includes 10 multiple-choice quizzes, several resources and a free day trading ebook download with in-depth trading strategies and education!

This class is a step-by-step guide to learning everything you need to know about reading "the tape." You'll be taught all of the basics about level 2 and time & sales as well as detailed strategies for reading the market's price action and being able to trade profitably based on it. The tape is #1 tool used by the most successful traders and in this course you'll gain a major edge by learning how we use it to trade like professionals!

You'll be learning from a self-taught, full-time day trader on a mission to help other traders avoid the same mistakes that he made early on in his career.

If you're someone interested in learning how to accurately read price action and improve your profitability in any financial market (stocks, forex, futures, options, etc)... this class is exactly where you should start!

What You'll Learn:

  • Level 1 vs. Level 2

  • Supply & Demand

  • Time & Sales

  • What is “Tape Reading?”

  • The Importance of Tape Reading

  • Hidden Buyers

  • Hidden Sellers

  • Fakeouts & Manipulation Tactics

  • Identifying Reversals

  • Buyer & Seller Exhaustion

  • Screen Recording for Practice + Live Examples!

  • Setting up Your Trading Platform

  • Stock Market Dictionary

  • + MUCH more!

*Enroll now to save yourself countless hours of studying and potentially save yourself thousands of dollars in losses that many new traders face due to lack of preparation.

Meet Your Teacher

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Travis Rose

Financial Analyst & Trader

Teacher

ABOUT ME

 

Hello! My name is Travis and I'm a full-time day trader and investor in the stock market. When I first started investing, I learned everything "the hard way," which lead to me taking a lot of unnecessary losses. Fortunately, through years of trial and error I figured out how to profitably navigate the market. 

I've decided to put together all of the lessons I've learned over the years into my courses/classes to help new traders and investors avoid the same mistakes that I had previously made. I've now helped over 10,000 students worldwide across a variety of e-learning platforms and am happy to have been able to help so many get started on... See full profile

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Transcripts

1. Preview: everyone. Thank you for checking out this course day trading secrets. Learn how to day trade by reading the tape, the more full time day trader and investor in the stock market. And I'm gonna be your instructor today for this course Now, before diving in, I wanted to give a brief outline on things that you're gonna be learning within the course . So with that being said, we're going to start with some of the basics of reading the tape, which is level one versus level two. We're gonna talk a little bit about the differences between the two supply and demand and how it affects the market and how it actually affects the price fluctuations that we see in the market. We'll talk about the time and sales. What exactly is tape reading the importance of tape reading out a spot and take advantage of it and buyers and sellers? We're gonna talk about the different fake out and manipulation tactics that are used by big institutions, hedge funds, banks and essentially the traders that actually make up the market. Because, of course, if you're able to spot these manipulation tactics, you're gonna be able to save yourself countless losses, and you'll actually be able to avoid many of the common mistakes that most new traders do when they first get started that causes them to lose money and ultimately fail with their trading. From there, we're gonna talk a little bit about how you can use the tape to identify reversals in the market and talk about what is known as buyer and seller exhaustion. And, of course, throughout the entirety of this course, we're gonna be jumping back and forth between the slag show, which has all of the information in it over to my trading platform so I can give you plenty of live examples and show you exactly what I mean in real time, as well as show you different screen recordings that I have for you to actually be able to practice reading tape in doing things like spotting hit and buyers and spotting heading sellers as well as looking for different patterns in the tape that's gonna help you get a significant edge over your competition. So if you want to be able to accurately read price action in any financial market, whether it be the stock market, foreign exchange market futures options, crypto currency and so on and so forth. Or, of course, just improve your trading accuracy and overall profitability with trading strategies that will give you a serious edge over your competition. This course is the perfect place to start. So without further ado, let's go ahead and get started right now with lesson number one, level one versus Level two. 2. Introduction : everyone. Welcome to the day trading secrets. Learn how to day trade by reading the tape, of course, before diving into the main topic, which is, of course, tape reading. I wanted to give a little bit of background information about myself, tell you how I got started as a trader and what led me to start creating these courses here or others to learn from. So first, I have been full time day trading in the stock market for over five years now. I'm self taught. I wasn't a part of any chat rooms. I didn't take any courses or online classes, unfortunately, and because of that, I learned everything. Quote unquote the hard way. And the hard way is, of course, by taking a lot of unnecessary losses that I could have very easily avoided if I would have just followed in the footsteps of someone else who was already trading profitably. And because of that over the years, I decided to start creating these courses, help other new traders aboard the same states that I made when I first got started, and also the same mistakes that just about every new traitor faces that ultimately leads many traders to blow their trading accounts and eventually give up on trading entirely. So the information in my courses is designed to save you countless hours of studying and potentially thousands and thousands of dollars in losses that many new traders space due toa lack of education And ultimately, that's why I started creating these courses, and that's how it got to the position that I'm in today. So I look forward to teaching you the things that I've learned over my years of active trading experience and with that being said, Let's go ahead and get started right now with the first main lesson of this course, which is level one versus Level two. 3. Level 1 vs. Level 2: level one versus level two as traders. It's important to know the difference between bubble one in level two. However, I will say that through the entirety of this course, our main focus is gonna be on the Level two and some other things such as the time it sales , which is gonna be what we're using when we're doing our tape reading. But just start off with some of the basics here. I just wanted to explain to you what level one in what low to our first place. So level one is going to display to you the I spit in the lowest offer or the lowest ask in real time for an individual stock. So if we take the example down at the bottom, we have the level one for Facebook and you can see on the right side there that the current highest bid there's $192.10 for 2200 shares in the current lowest asked is $192.14 for 200 shares, most of the time with level one. You'll also be able to see the last price of sock. How much. The stock has gone up or down for the day, both in dollar amount in percentage. You'll also be able to see the stocks total daily volume so far today. Now level two is going to, of course, take things a step further. Bubble tea displays to us, the order book for stocks from various exchanges. It includes the price number of shares in the route for each active border. So if you look at the example down at the bottom, you can see that it's kind of split into two sides. You have the bids, and you have the asks most of the exchange for it order and next to bid you CBS, which stands for the bid size. And that's the number of shares being bought and only asking about A S, which is the ask size. And that's the number of shares looking to be sold at that price now, depending on which type of trading software in which brokers you're using, your level 2 may look a little bit different from this example here. So if we go to the next slide, here's another example of what level to willkommen he looks like and you can see that the two sides were bids and the acts are a little bit or distinctly apart from each other that in the previous example. But regardless of which platform you're using, your level two is gonna show you the same information as other traders, and you're still gonna use it the same way. So because Level two shows us the order book for all live orders in the market every time you place in order to buy or sell yourself, it's also gonna be visible level to for yourself in other traders to see. And essentially all this means is that Level two is going to allow us to visualize the current supply and demand for any given stock at any given time, which you're going to find out in. The next section of this course is how important supply and the man is in the market and how it actually directly affects the price of stocks 4. Supply & Demand: One thing that many new traders do not yet realize is that the market moves solely based on supply and demand, much like the economy. If you think about an item that has a lot of demand for it, but there's a very limited supply generally, the price of that item is going to go up on the other side of the spectrum if there's a large supply of something and there's very little demand and there's not many buyers a person that is going to likely go down or even just state, it seems, and the market is very similar in that way and this plan, the man is actually what causes price fluctuations directly, even though most people seem to think that it's based on news, press releases, earnings reports and other articles of news. And while those things do indirectly affect the person of stock, the supply and demand is what is actually directly affecting prose fluctuation. So, for example, if the company put out there and support and they stated that the company's revenue over the past quarter increased by 50% that's good news for the company, and that's going to generally be good news for the stock as well. And because of that that's going to affect the supply and demand of that stock. You may see a larger demand to buy that stock than you typically would, and you may see that there is a smaller amount of supply or a smaller amount of sellers for that stock in the near future because of that positive news. So that's how supplying the man actually affects the price of a stock. If there were more buyers than there are cellars, price of the stock will rise. And if there are more sellers than buyers, price of the stock will fall Now. What we talked about in the previous section when we were discussing Level two is that you can actually visualize the orders for any given stock by looking at the Level two so you can see the bids where people are buying and you can see the asks where people are selling . And if you think about it, this is actually going to show us the current supply and the man for any given stock. The left side, which shows us the bids, is going to be, of course, buyers, which is the demand and the right side, which shows us the asks is going to be the sellers in the supply so we can use this information in the level two to, of course, hopeless with our trading. For example, if you see a significant imbalance on the Level two, that could be a good indicator to buy or sell the stock. And when I mean by a large imbalance is, for example, if you see 50,000 shares being bought at $3 on the level two and only 1000 shares being sold on the level two at 301 you can safely assume, of course, that the demand that that price is stronger than the supply. This is like me to cause the stocks pros to rise from the $3 level, making it a potential opportunity to buy. So at the end of the day, this is the simplest way for us to use level to weaken, look for large imbalances and weaken spot levels where there is a much stronger supply or a much stronger demand. And we can use that information to help us look forward by opportunity or some opportunity . Now, of course, on the other side of the spectrum since I gave you an example of much stronger demand and supply. There also may be a time where you see, for example, 20,000 shares being sold on the ask of level two at $7.50 and only 2000 shares being bought at $7.49. Course you can safely assume again that this time there is a much larger supply than there is demand at that price. And this is gonna cause the stocks pros to decline from the $7.50 level, making it a potential opportunity to sell. If you were currently in a position, we're even looked to short sell that stock in profit from it going down from that level. No one very important thing that we're gonna be talking a lot more about throughout the remainder of this course is that professional traders and traders with top notch trading software are able to use specific order routes to actually place their trades without them appearing on Level two. So when you and I place the trade using, you know, for example, when a broker like E Trade or TD Ameritrade of Robin Hood. Something along those lines, our orders are course going to show up on the level two. But again, that's not always gonna be the case with other professional traders that are using more advanced trading software. So because of that, because they're able to hide their orders from Level two, they can use that to manipulate the public like you and I and profit from our loss is. And that's what we're talking about in several of the sections of this course, so that we can learn what to look for on the tape. It's gonna indicate that people are placing wars without them showing up on the Level two, and you can avoid being manipulated and losing money like many new and inexperienced traders do. However, one thing that is very important is that no one is able to hide their trades from the time and sales. So once that order is filled, it's gonna show up on the time that sales, regardless of if they get it from level two or not. And because of that, being able to pair of your level two and your time and sales together is gonna give you the full story of the price action and being able to properly read the price action is gonna give you a significant edge over your competition. So stay tuned for the next section of this course because we're gonna be talking now about the time and sales, and then we're going to, of course, get into how we can use both the level to in the time it snows together to read the tape. 5. Time & Sales: time and sales now essentially, time and sales is going to be the other half of the equation. When we talk about reading that tape, the first half of that equation is the level to which we already briefly went over earlier on in this class. And I want to do the same with time and sales before we talk about putting the two together and reading a tape and using the tape to actually find entries and exits on our troops. So first and foremost, time and sales is gonna show us real time data of every transaction that goes through in each stock. So every single time that you buy or sell shares in the live market, that's gonna show up on the time it sells, not only at what first that you bought or sold up, but also the amount of shares that you bought. So and the same is gonna be true for every other transaction market. Now, I mentioned briefly that with level two, uh, you know, there could be special order routes that actually hide orders from Level two and many times , institutions or banks or hedge funds, or really any truer with advanced trading software. They can use these hit and orders to manipulate retail traders like you and I that don't necessarily know when they're buying or so now the reason that I bring that up again here is because time and sales on the other and cannot be manipulated, meaning nothing can be hidden from the time it sells. So every time that somebody buys herself, regardless of if they're using a special order out to hide the order from level two or if you're just using a plan, order out like you and I will probably used to place their order Once that order is filled in the life market, that transaction is going to be shown on the time it sells. Now, because of that, when you pair level to you in time and sales together, that's gonna give you really the full story of the price action. Which is why we used the two together to do our tape rooting, you know, just to give you an idea of what time and sales is generally going to look like, depending on which trading platform you're using. This is an example from The Thinker Swim Platform with TD Ameritrade But again, generally it's gonna look something along these lines. You have, of course, the price. And that is gonna be the price of the transaction. You have the time. And that's time that the transaction was processed. It actually went through in the live market. And last but not least, you have the size, and that's gonna be the number of shares that were traded in that transaction. Now there's three simple things make up the time it sells. And believe it or not, you're gonna find out in becoming sections of this course. How you can use those three things belong with your level two actually gain a very significant edge over your competition in the market by learning to read the tape, which can be a highly effective trading indicator. 6. What is Tape Reading?: so at this point within the course, you probably already have a great idea about what tape reading is and how you can use it to improve your trading. But before we get into the strategies I really wanted just hammer home the idea of tape reading, get into some of the specifics about what, exactly it is so to define tape reading. It is a trading technique done to analyze the price in volume of a given stock to return for the direction the stock is likely to move going forward and, like I've mentioned a few times already, a level two in the time it sales are course going to be our main focus while we're reading the tape because they give us the real time price and volume data. One thing that you should always keep in mind is that while you are reading tape, it's very important to pay attention to both the level two and the time and sales because knowledgeable traders are going to use manipulation tactics to try to trick you. Of course, if you're looking at both the level two and the time and sales they're gonna be less likely to do so that if you were just watching one or the other, and one example of that that we're gonna talk a lot about in the future, it's hidden buyers and hidden cellars. It M buyers and Hidden Cellars are found by looking at both the level two and the time it sales and looking for differences in what is being shown and what is actually happening on the time in sales. If you were looking at just one or the other, you would really only be getting half of this story, and you would likely be missing out on the fact that there was a hit and buyer or a hidden cellar at that price. And because of that, you would probably end up falling for the manipulation tactics that most new traders unfortunately, do fall for. So once we get into the strategies and the techniques in the next sections of this course, you're gonna learn exactly how you can use the two together to read the tape and be able to afford these manipulation tactics. It's actually be able to follow these manipulation tactics and profit along the big traders , such as the banks, the institutions that hedge funds and so on and so forth 7. The Importance of Tape Reading: hopefully by now. You already understand the importance of reading the tape when you're doing your trading. But if not, I just wanted to give this brief section of the course to really kind of share with you wide is so important and why so many professional traders use it as their number one indicator. And with that being said, tape reading is the number one strategy used by most professional and successful short term traders. In fact, many proprietary traders don't even look at the church when they're doing their trading. They only look at the time and sales in the level two, and the reason for that. The reason that it's so important and can be so effective for your trading because the tape is actually the only indicator that isn't quote unquote lagging, and that's because it's showing us every order in every single transaction in real time and how it's affecting the market. Lagging indicators on the other end take past data to calculate that indicator, which is supposed to be used to help Teoh predict future price action. But at the end of the day, all of this lagging information is only gonna give you a slight edge, any edge at all in the market because the data used to calculate these is often too slow or too far behind. And it's not gonna help much with the current price action or even the future price action prediction. So a few common the use indicators that are considered lagging indicators are the Iraq, which is the volume weighted average price moving averages, Bollinger bands and someone and so forth. Now I'm not saying that these can be used to help find some edge in the market. Did you are intruding, But when it comes down to it, they're not gonna give you nearly as much of an edge as you would get from properly learning how to read the tape. The tape really allows us insight into the market to see where large traders, banks, institutions, hedge funds and others are buying and selling their shares. These locks, traders believe it or not, make up over 90% of the stock markets volume on a daily basis. So, for example, if you're washing a big mover for the day and by the end of the day at the market's close, that stock traded, let's say 10 million shares, less than one million out of those 10 million shares that were traded in that stock that day are gonna be from traders like you and I, who are considered retail traders. So being able to spot these large traders that actually make up the market and move the market really in either direction that they want to you with their strong supply and demand and, of course, being able to then trade with them. But you had a significant advantage over other retail traders. 8. Hidden Buyers: it m buyers or something that most traders, and especially most new traders don't know how to spot when they're doing their tape reading. Because of that, this is gonna be a very important section of the course. Because if you're able to spot these hit and buyers and use the information that the hidden buyers air showing you that's gonna put you at a significant advantage over these other traders and is often gonna help you trade much more accurately. So, first and foremost, when we talk about hit and buyers, these are gonna be large orders to buy on the bid. Which, of course, is our demand that are also gonna be hidden from the level two so pretty self explanatory, right? Hidden buyer is a large order on the bid that's hidden from level two. So these are orders that we can't see on the Level two. And because of that, many people don't know how to spot them Now. The way that we spot them is if we have, for example, somebody looking to buy 500 shares on the bid at $8 per share. But if we look over at the time and sales also because, remember, it's very important that you're looking both at your level two and your time and sales while you're doing your tape reading and on the time in sales. In this example, it's showing us thousands and thousands of shares being traded at that same $8 mark without the 500 share bid budget. So that tells us really that there's somebody buying much more than 500 shares at $8 by using hidden orders. And the way that we would use this for our trading is the same way we would use any other significant imbalance of supply and demand. So going back to the example that I believe I gave earlier within the course, if you have, for example, somebody buying 50,000 shares at $5 and at 501 there's somebody selling only 1000 shares. That tells you, of course, that there is a much larger demand and there is supply at the $5 area, and because of that, the stock's price is likely to go up at least a little bit in the near term. So the same thing is true with hit em buyers. If we know that there's somebody buying a significant amount of shares, even if they're hiding them from the level two, we can assume that there is a large demand at that price level. And that can often lead to a great opportunity to buy for a quick day trade, allowing us to take advantage of these hit and buyers pushing the stock's price up temporarily. Okay, Now I want to go on to the next slide here. And what I have here is actually a real screen recording of the live market. And over here, we have, of course, our level two, the left side showing the bids. And these are the bit sizes here, and these are by the hundreds. So this first bid is $4.12 for 600 shares, followed by $4.12 for 300 shares, and so on and so forth. And over here, we, of course, have our sellers, and this one is gonna be $4.14 for 100 shares. And then over here, we have our time in sales. This is gonna show us our prices of each transaction going through. This is gonna show us the size of each transaction going through and then over here. We, of course, have the time of the transaction going through. Now, this is actually about a 3.5 minute long green recording of the tape. And what I want to do is play this for you guys. And I want you to practice reading the tape and try to spot the hit and buyer on your own. Um and I will tell you right now that this is not a trick. There is actually hidden buyer in this video. So be on the lookout, of course for that, and you want to be looking both at the level two and the time and sales, and then hopefully you're able to spot it on your own. But if you're not, don't worry, because we're gonna go back through it together afterwards, and I'm gonna point out to you exactly where they hit em virus, so that when you have some practice and you know what to look for, once you start trading on your own and what you start implementing your tape reading skills into your own trading. All right, so I'm gonna go ahead and play this and again. This is about 3.5 minutes long, and I want you to do is try to look for the hidden buyer. All right, so I hope you were able to spot the hidden buyer. But if you weren't, I will say that this is something that takes a lot of time in a lot of practice. So if you weren't able to spot them yet, don't worry. You can always go back to this again in practice a few more times on Also, something that I want to mention is that this is again something that takes a lot of practice. So if you don't have a lot of time to watch the live market, something I always recommend traders to do is to look into some kind of free screen reporting software. I'm currently using Quick time. But you can also use something like will be, Yes, I know you have to do is download that software again. It's free, and then you can use it to record the market while it's live, and then you can later on. Go back and rewatched on market data to practice your tape reading skills. OK, But what that being said, I want to go back through this real quickly now, just to point out to you where the hit and buyer was that. And in this case, it was about at $4 in 17 cents, right at about a minute into the video. So I'm gonna go up to about a minute. Um and we can see here that right off the bat, there is a bid for $4.17 only with 100 shares. Okay, so if we go out and play this, you're gonna start seeing multiple hundreds of shares being traded up for 17. And even though there's only a small bid at 4 17 it still remains there while these trades are going through. So right here we can see a few 100 shares being treated at 4 17 And right now we have another 1000 share bid in a 100 share beds, so 1100 shares total being bought at 4 17 Go ahead and play this again. You'll see a few 100 more in a few 100 more. And now we have a total of 400 shares being bought. Few 100 more shares at 4 17 And right there we get quite a few shares going through at 4 17 All of these red ones here, we still have that same $4.17 bid, this time for 200 shares, and it doesn't seem to be budging, even though there are hundreds and hundreds of shares going through few more shares, therefore 17. And from there the bids start to increase in. The stock actually starts to spike up pretty significantly, and at its peak it actually goes over $4 in 60 cents. So that just goes to show you that using these it in buyers and actually looking for these hidden buyers on your time and sales in your level two can lead to some great trade opportunities. Because if you were able to spot that hit and buyer in real time at 4 17 and you decided to buy into this stock because you know that there is a large amount of demand at 4 17 just a few minutes later, you would have been able to sell over $4 in 60 cents per share, so that hopefully should give you an idea about how effective reading the tape and looking for things such as hit and buyers can be and why I strongly recommend new traders to focus on learning how to read the tape in to spot things in the tape to implement into their own trading. 9. Hidden Sellers: so another. You know what hidden buyers are. Hidden cellars are probably going to be pretty self explanatory. They're really gonna be the exact opposite of what? A hit and virus. So this is gonna be a large order to sell on the ask, which is, of course, going to be a level of supply that is also gonna be hidden from level two, and that can drive the stock's price down. So we're gonna use the same information from the level two and the time and sales to spot these hit and sellers as we would use to spot hit and buyers. So, for example, if you see an order on the asked to sell 200 shares at $5 per share, But the time and sales is showing thousands and thousands of shares being traded at $5 without that 200 share order budging, this means that there is likely somebody selling much more than 200 shares at $5 by using their head and orders. So if you were in a long position and you recently bought into the stock, if you see hidden selling, this can be a great opportunity for you to sell before the price reverses back down. Or you can also use it to look for an opportunity to short sell. Because, as we know, if we see these hit and Sellers, that's likely going to drop the stock's price down temporarily. And short selling allows us to profit from stocks going down. Okay, so just like with the hit and buyers actually have a live example also of a hit and cellar , and we have again the level two over here in the time and sales and what I want to do is the exact same thing we did in the previous section. And I'm just gonna play this screen reporting, which is about four minutes long for this one, and I want you to try to spot the hit and seller on your own, and then we'll go back through it together, and I'll point out to you exactly where the hidden cellar is so that hopefully you can know exactly what to look for when you start reading the tape on your own while doing your own trading. Okay. So again, if you weren't able to spot the hidden cellar on your own just yet, don't feel bad because this is something that takes quite a bit of practice. And I do recommend that you go back through this again if you feel you need to try to spot the hidden cellar. But what that big said, I want to go back now and point out to you exactly where it was that. And in this case, I will say that the hidden cellar was at $2 in 34 cents. So I'm gonna go ahead right now and actually click play about a minute into the video, you know? See, right now there is an order on the ask at 2 34 for 500 shares. And we're going to see is that there are thousands and thousands of shares being traded at 2 34 even though there's only a few 100 shares being shown on the ask. So right now the order goes up to about 2000 shares at 2 34 and you can see in just a moment there would be thousands of shares going through at 2 34 So right there there's 2100 shares going through in just one order and another 509 151 105 105 101 152 100 so on and so forth. And now we have in order at 2 34 for only 100 shares, and they're still gonna be hundreds of more shares going through at 2 34 so you can see that there are quite a few shares going through. Um, we still just have a pretty small offer over here at 2 34 and it doesn't seem to be budging , no matter how many shares trade at 2 34 So there's clearly somebody selling much more. Then they're willing to show on the level, too there and that added supply is likely going to drive the stock's price down. And that's exactly what we see happen later on in this recording. But fast forward here. You can see that it starts to go down pretty quickly. Eso If you were seeing that hit and seller in real time, and you did have a position that would have been a good opportunity for you to sell before the stock did come back down, or it would have been a great opportunity for you to look too short. Sell and profit from the stock moving down from that area 10. Fakeouts & Manipulation Tactics: so another. We're really starting to get into tape reading and some of the different strategies and techniques of tape reading. You may be starting to see how big banks in traders and institutions are able to actually manipulate retail traders like you and I in order for them to actually profit. So in this section, I wanted to talk specifically about a lot of the fake outs that are done that many new traders fall for and causes them ultimately to lose money, even though they're very avoidable losses. So the first of these is going to be what are known as fake bits, and these are gonna be large bid shown on the level to with no intention of them actually filling. So these bids will be cancelled before filling and are used to manipulate retail traders again like you and I to buy while the fake buyer is actually selling shares. So just to walk you through this step by step first thing we'll see is, for example, a 50,000 share bid at $5 on the level two now, many times, that can offer us a great opportunity to buy into the stock. But you should always be cautious when you see these abnormally large orders, because sometimes they can be manipulation tactics that are simply trying to fool you and fake you out. So in this case, we see a 50,000 share bid at $5. Retail traders start to buy the stock at 501 by, though, to 503 and someone and so forth because they're expecting the large buyer to push the price up. What really happens, though, is then the 50,000 share bid is going to get cancelled, and that fake buyer is then selling to the people that are buying at 501502 in someone and so forth. So they may be selling a large position that they recently owned. Or they may be selling toe open up a short position because they're expecting the stock's price to go down, which would allow them to profit from their short position. And then because the stock's price comes back down to that $5 level and there's no longer 50,000 share bid at $5 price is gonna fall below that level, and retail traders that just bought over $5 are now losing money in the fake buyer is in the profit on their short position. So with all that being said, it is very important again to be very cautious when you see an abnormally large bed shown on the level two. Keep in mind that if somebody is buying that many shares, they most likely could have used a hit in order to do so so many times, they want you to see their large bid in order for them to actually manipulate you and try to fake you out. So if you're watching the tape and you do see the price, reach an abnormally large bid and it disappears without the time and sales showing that it was filled, it may be best to sell your position or even looked a short so opposition because that can indicate to you that that bid was fake in the first place and that whoever was trying to manipulate retail traders actually has a short position of their own. Now, on the other side of the spectrum, there is, of course, also going to be fake asks, and these are gonna be large asks, shown on level to with no intention of them actually filling. So these sellers cancer, their order to sell before they're filled and again are gonna be used to manipulate retail traders like you and I to So while the fake seller is actually buying shares. So to give you another example of this first off, we would see maybe 30,000 shares on the ask at $6.50 now, because that's a pretty big order. At 6 50 many retail traders may see that and start to sell just below that order at 6 49 6 48 and so on and so forth because they're expecting that large cellar to drive the price down, at least temporarily. The next thing that happens in this case, though, is that the 30,000 shares being sold at 6 50 it's cancelled before it gets filled. That fake seller is then buying the shares of the people that are selling at 6 49 6 48 and so on and so forth a nun later on. Once the price gets back to that 6 50 level, there's no longer a large amount of supply being shown on the level two. And because of that, the stock is gonna rise above that level. And anybody that sold under 6 50 is then missing out on some profits. And anybody also that sold short, expecting the press to go down so they could profit is not gonna be at a loss on their short positions. All right, so just like large bids on the level two when you see a large ask, it's also very important to be cautious that because you have to keep in mind, somebody selling that many shares could also use a head in order to do so. So there's a reason that they want you to see their large border and many times, unfortunately, it is a manipulation tactic that many new traders fall for. So with that being said, if you see a large order on the ask and you see the price reached that asking, it disappears without the time and sales showing that it was filled, it may offer you a great opportunity to buy into the stock. And it also may be a good indicator to cover your short position if you're currently in one , because there's a good chance that the stock's price would rise from that level, 11. Identifying Reversals with the Tape: to finish up the course. I wanted to talk a little bit about identifying reversals by using the tape. The tape can actually be a great indicator of winter. Stock has reached its short term top or bottom, and it's about to reverse in the opposite direction. One of the ways that we can use tape to identify reversal is by looking into the stocks spread. So for those of you who don't know, the spread is the difference between the highest bid and the lowest asked on level two. So if we go all the way back to when we talked about level one and level two, you can see here We have, of course, an example of the Level two, and we see the highest bid for this example is $43 in 39 cents in the lowest ask is $43.40 So the spread for this stock is currently only at one cent. Now, if we go to the example before you can see that the high spit in this case is $192 in eight cents in the lowest asking is $192 in 11 cents. So in this case, the spread is three cents. So we can actually use this information in the spread to identify reversals in the stock. A tight spread that is becoming larger shows us that this planned a man imbalance is reversing. Because of this, the price often reverses as well. So what I mean by that is if we take this example here that I put together, you can see on the far left side we have one Level two are we have the bids and we have the asks. And then over here we have another level to showing the bids. And he asks. Now, while the stock is trending in either direction, you're going to see that the spread is typically pretty tight. And in this example, it's only one cent because we have the highest bid at $3.61 and the lowest ask at $3.62 now . Below that, the next best bid is at $3.60 which is only one cent below the highest bid, and the next lowest seller is at $3.63 which is only one cent above the lowest cellar. Okay, so that's typically what the level two is going to look like when a stock is trending in either direction. Now, at the reversal point, you'll notice and key differences. Here we have the highest bid of $3.61 and we have the lowest ask of $3.66. So the spread in this case now is five cents. And to take it a step further, if you look below the highest bid, you could see that the next highest paid is 3 60 so that one is only one cent below. But if you look below that, the next best bid is $3.58 which is two cents below and then below that. The next best bid is $3.55 another three cents below, and so on and so forth. And over here on the selling side, you can see that the next lowest seller is at $3.68 followed by $3.71. So there's a three cents difference between those sellers and at the end of the day, what you'll see is that at a reversal point, there's a lot more inconsistencies in the level two. Then there is when a stock is trending nicely in either direction, and that's one way that you can use the tape to look for potential reversals in the market . Now, another very useful way to look for a reversal in the market is to look for potential buyer . Exhaustion by exhaustion happens when a stock moves up too much, too quickly. At a certain point, that large amount of demand is going to become unsustainable, causing the stock to inevitably pull back or reverse to the downside. So if you take the diagram example at the bottom, you can see that when the stock peaks. There's also a peak in volume showing that there is a level of buyer exhaustion. And one way to think of this is when a stock is trending up. You can kind of think of it as somebody that is jogging a stock in trend up for a long time , just like somebody that is jogging at a nice, steady in slow pace in jog at that steady and slow pace for a long time. But once the stock starts to significantly spike. That's kind of the equivalent of somebody that is jogging going into a full sprint. Inevitably, that person is going to get tired and they're gonna have to take a break. And similarly, that stock that is spiking is going to eventually have to pull back. Now, a great example of buyer exhaustion is Bitcoin back in late 2017 in early 2000 and 18. I don't know about you, but at that point I believe everybody was talking about Bitcoin. You would constantly hear about it on the news. It would be all over social media, people that don't know anything about investing. We're talking about Bitcoin and they were asking how they can buy into Bitcoin because it was really going crazy and it was spiking very, very strongly. And unfortunately for many people, that's when Bitcoin really was started to sprint and was ultimately at the worst time that they could have bought. So if we take this example here of the stock symbol 80 excess, you can see right at the high of day at 48 cents, you can also see that that is exactly where the highest volume for the day was when the stock was spiking into that hot. So before that, there's a nice, steady trend with a pretty consistent level of volume. But once the stock starts to quote unquote Sprint and all of that volume comes in and spikes up significantly, that indicates to us that there is some buyer exhaustion and that there is likely to be a reversal. And in this case, that's exactly what happens in the stock. And it falls from about 48 cents all the way down to about 42 cents now very similar to buyer exhaustion. We have also, of course, seller exhaustion. And this is gonna be when a stock moves down too much too quickly and that amount of supplies going to eventually become unsustainable, causing the stock to inevitably bounce back up. You can see that there is a few examples here of both buyer and seller exhaustion. So if I go ahead and exit out here, I want to point out to you that right here, as the stock spikes up into this high, we have a candle, a volume that is much stronger than it's been throughout the entire day just about other than the opening one minute. So that tells us that this spike here, there was some buyer exhaustion, Mom, and you can see that the stock kind of consolidates in that area for a few minutes before it does have a pretty nice pull back down. And at the bottom of that pull back, you can also see that there is a little bit of cellar exhaustion as well. We have a pretty consistent level of volume before we see the seller exhaustion and right down there at the bottom, we see a nice spike up in volume showing that that is a potential reversal spot and that there may be some cellar exhaustion. And from there we see that the stock does reverse from that level, goes all the way back up and again, we get a nice level of buyer exhaustion into this spike. Here we see that there is a nice trend before that, also with a pretty consistent level of volume. And as the stock spikes, we also see the volume spike before reverses back down. All right, so that really shows us that ball human price should go hand in hand when you're doing your tape reading and when you're looking for all of these things, that could potentially indicate a reversal in a stop. At the end of the day, all of these things paired together are hidden. Buyers and sellers baked bids, Fake asks major changes in the spread on level two, and even big spikes in volume can often be a great indicator to buy or sell a stock and is a huge part of reading the tape. As somebody that day trades for a living and uses the tape on a daily basis, I can say with confidence that all of these things happen on a very regular basis, and I actually used them regularly in my own personal trading. So it's very important that you're able to spot these on your own if you are serious about taking your trading to the next level and improving your tape reading skills. So I highly recommend that you stick around for the next section of this course so you can actually practice reading the tape on your own and looking for all of the things that we talked about within this course in the tape reading practice sections that are coming up next 12. Tape Reading Practice #1: 13. Tape Reading Practice #2: 14. Tape Reading Practice #3: