The Internet is full of information about the analysis of price charts and the most exotic technical indicators. Analysis of trading volumes is slightly less common, due to the lack of it among Forex brokers who actively popularize exchange trading. It is not difficult to find a good textbook on investing and fundamental analysis. But as for the use of the transaction tape and the order book, here Russian-language resources are limited to an explanation of the terms “bid”, “ask” and spread, which is where the entire analysis of these instruments, in fact, ends. There are some good videos, but they mainly describe situations in the US market, where ECNs and “dark pools” make their own adjustments to the trading mechanics. This article is intended to, at least a little, fill this gap and talk about how and why these tools can be used on the Russian market by an ordinary private investor.
Glass, tape, “offers” and “prints”
Exchange glass(level 2 on the American market) is a list of limit orders on the market at the current moment. As a rule, sales orders are located at the top and highlighted in red - they are also called “ aski"(from the English ask - demand). Purchase requests are highlighted in green, located at the bottom and called “ bids"(from the English bid - offer). Both of them are also called “ offers"(offers).
Sometimes only sales requests are called “offers”
The number next to the price indicates the number of lots (or contracts on the derivatives market) that can be bought/sold at this price. If you want to buy, for example, 100 lots, then you can buy 15 lots at a price of 74.84 and everything else at 74.85. If you sell, then the entire volume can be sold at 74.8. If these prices do not suit you, then you place a limit order at the price you are interested in, it appears in the order book, and you wait until there is a bidder who will execute it.
Glass depth
The glass is characterized by depth. The depth of the order book “20X20” means that the window will display orders at the 20 best selling prices and the 20 best buying prices.” As a rule, most brokers provide exactly this depth of order book. If you see less, just try connecting to another server in QUIK. Depth greater than 20x20 can be obtained on an individual basis; as a rule, it is required in the futures market.
An alternative type of glass that can be changed in the settings
Deal Feed
Deal Feed (level 1 on the American market) in Russian reality, where the QUIK terminal firmly holds its position as the main trading terminal, it is called the “Table of Impersonal Transactions”. You can find it in the menu Create window -> Table of impersonal transactions. If it turns out to be empty, then you need to correct the settings in the menu “System -> Order data -> Flow of impersonal transactions”. If you are met with an empty list there, you need to contact your broker with a request to enable the flow of impersonal transactions. By default, it can be disabled to reduce the load on the user's Internet.
The transaction feed displays all transactions that take place on the selected exchange instruments. To use it effectively, it is better to configure one table for one tool. For clarity, it is convenient to highlight buy and sell transactions in different colors.
Each line in the feed is called a “print” and indicates a deal at a specific price. The number next to the price indicates the number of purchased/sold lots (or contracts on the derivatives market).
Thus, the order book gives us information about limit orders on the market, and the tape gives us information about what volumes of transactions were concluded at various prices.
You can read more about how to set up the tape and cup in the QUIK instructions or find a video on the Internet. Let's now figure out what can be seen using these tools
Spread, liquidity and trading activity
The liquidity of an exchange instrument is the ability to quickly buy or sell an asset at a price close to the market price. No problem selling or buying 1 lot. Many stocks allow you to quickly make a trade with 1000 lots. But when you're working with a volume of 10,000, things get a little more complicated.
The first thing you should pay attention to is the number of applications and their density in the glass. As a rule, for one instrument the density of orders is approximately the same for the same market phase. By how densely the orders are located, how many there are and what the average spread is, you can quickly assess liquidity, the amount of slippage of a market or stop order, and how much volume can be quickly gained without “smearing” the position across prices. For example, you can open and put the glasses of shares of Sberbank-AO and Sberbank-up side by side for comparison.
It is clearly seen that buying 5,000 shares of JSC and 5,000 shares of AP are completely different things. (For JSC there are 10 shares in one lot, for AP - 100). If in the first case you can simply buy at the market, or even place a limit order at 226.32 and be confident that it will be executed, then in the case of preferred shares the situation becomes more complicated. When buying on the market, you immediately lose 20 points on the spread, and in addition, the average purchase price will be even higher due to the low supply. If you place a limit order for 50 lots, there is no guarantee that it will be executed in full and you will not have to “catch up” with the rising price later.
You can also immediately assess the feasibility of setting an automatic stop loss. If in Sberbank-AO slippage can be limited to 15-20 points, then for Sberbank-up this can promise much more significant losses.
For convenience, you can go to the order book settings and check the “sparse order book” box. Then the gaps between prices and the spread will be displayed more clearly.
An example of a rarefied and regular order book of MMK shares
It is immediately worth noting the fact that the authors of those orders that are in the glass do not always want to execute them. Quite often, when active transactions appear on the market, some orders are canceled. This is especially common in low-liquid stocks, such as RSTI, NLMK, RASP, etc., where large gaps in the price feed scalpers and trading robots that actively rearrange their orders. It is possible to evaluate which orders were actually executed and which were simply canceled only by looking at the transaction feed.
You can also evaluate trading activity using the feed. The number of “prints” per second and transaction volumes will give an understanding of how actively the instrument is traded and at what speed quotes can move. For medium-term transactions, this nuance can be useful when entering and exiting a position, for example, when you need to assess the truth of the breakout or how strong the market reaction to the news. In general, the following points should be considered:
Frequency of “prints”, their volume and direction. A quick analysis of “offers” with large orders in one direction indicates strong pressure from participants on quotes. The term "fast" is relative and is determined by observing a particular instrument. You can also focus on the time scale in the feed if the frequency is low. During the day, trading activity is usually lower from 13 to 16 hours Moscow time.
Narrowing of the spread by “offers”. If the active analysis of “asks” is accompanied by a narrowing of the spread on the part of “bids”, at which transactions rarely take place, this is a sign of the strength of buyers. It’s even better if large orders begin to appear among the “bids”. If this happens at the moment the level is broken, we can consider this as another confirming signal of its truth. The same is true for downward movements.
During important news releases, activity is very high . It is characterized by a very high spread and frequent multidirectional transactions, especially on instruments with low liquidity. At such moments, it is very difficult to navigate the tape and glass in QUIK. You just need to understand that the market is volatile and the risk is high and adjust your trading based on this.
Bidders
Before looking for more specific signals in the order book, it is worth understanding whose actions can be seen there. There are a large number of diverse participants in the market, which can be roughly divided into the following categories:
High frequency robots ( HFT)
The execution speed of transactions can be microseconds, so it is unlikely that you will be able to see them using regular QUIK. However, their transactions are displayed in the feed and can provide useful information. Essentially, these are the same trading algorithms, but with a significant advantage in speed.
Scalpers
Trades inside the spread— the scalper places the best “bid” to buy, and then immediately places the best “ask” to sell. With a well-chosen moment and a sufficient spread width, it is possible to make a quick transaction with a small profit that pays off the commission.
Transactions from a large “offer”— when a large order appears in the order book, it often cannot be satisfied immediately. The price runs away from it, driven by the closing of positions and scalpers entering the deal, hoping to make money on this rebound.
Transactions to “corrode” a large “offer” - when the flow of transactions for the “offer” is strong enough, scalpers enter into the transaction in the hope that after the “offer” is satisfied, the stop losses of those entering on the rebound will be triggered and will give a short-term impulse.
Market makers and trading algorithms
This does not mean those “scary market makers” who “puppet the market” and with whom supporters of conspiracy theories scare on forums. The Institute of Market Making was created to maintain liquidity in the market. These traders hold the spread so it doesn't widen too much, and they also buy when everyone is selling and sell when everyone is buying. Their goal is to be the other side of the trade for you when liquidity is insufficient. Such activity is beneficial to the issuer and the exchange in order to maintain the liquidity of not the most popular instruments. For the market maker himself, such trading is associated with certain risks, so market makers use special trading algorithms with bilateral quotes, and the exchange provides preferential terms for commissions, allowing the market maker to recoup costs and earn profits.
Like any developer of a trading algorithm, it is important for a market maker that its essence remains inaccessible to a wide range of traders. However, certain moments can be seen in the glass. In particular, you can pay attention to identical “offers”.
In addition to market makers, there are a large number of other trading algorithms on the market that implement various strategies. They can provoke false breakouts and other deceptive maneuvers over short time periods, so you should be vigilant.
Private investors and professional traders
We can roughly call them a “crowd”. Trading participants acting according to their strategies at different time intervals, who during strong movements can succumb to emotions and behave predictably (the more professional the participant, the less this is manifested). They are the “fuel” that makes the price move. Their activity and preferences can be assessed by the frequency and volume of transactions, rearrangement of “bids” and “asks”, expansion and narrowing of the spread.
Major players and investment funds.
The most interesting category of players. Having a large amount of money, such players can significantly shift the balance of supply and demand. The larger the amounts operated by a player, the more significant and long-term impact his actions have on the market. The main purpose of using a glass and tape is to determine the presence of such players, trying to understand their intentions and how successful they are. This skill is also called reading the tape.
Reading a tape is a difficult process, and to master it you need either high-quality video materials with comments, or a knowledgeable person who will point your finger where you need to look. And of course - a lot of practice. However, there are a number of simple formations that can be observed without special preparation.
What to look for in a glass
Large "offers"
When reading the feed, it is important to track large orders in the order book that are larger than the statistical average. Depending on the trading instrument, different values can be considered large. Basically, for second-tier shares, you can safely focus on values greater than 10,000 lots. For Sberbank, Gazprom and VTB these figures are more than 40,000.
A large “offer” must be considered in the context of its appearance. It is worth paying attention to it in the following cases:
A large order is at intraday highs/lows
After a good directional movement, players need to take profits. A large order can show the price where the majority of players are going to close the position, and a reversal is likely.
A large order appeared suddenly after a sideways event
Sometimes, against the backdrop of low activity, a large “offer” appears close to the best prices. It is worth considering in the context of what movements it appeared and how the market reacted to its appearance.
A large application is at the level
A large order at a level can serve two purposes - to gain a position and show the intention to maintain the level. Its presence indicates that the level can be maintained and you can focus on it when trading. When trading a rebound from such a level, you can significantly reduce your stop loss by placing it immediately after a large order. When trading breakouts, you can focus on the frequency of prints for the “offer” and its balance. On liquid instruments, it is sometimes permissible to open a breakout transaction by placing an automatic stop order immediately after the “offer”.
If nothing special is observed at the level, with a high degree of probability you can expect the level to be “cut down.”
Iceberg orders
Such an application has a visible and hidden part. For example, at a price of 100.00 there are 200 lots for sale. This is the visible part. As soon as these 200 lots are purchased, the application is updated and so on until the entire volume is purchased. In this way, large “offers” are masked so that the price does not “run away” from them. Iceberg orders supported by the Moscow Exchange allow a minimum ratio of visible to hidden parts of 1:100. However, bidders may use their own algorithms to organize iceberg orders, the parameters of which may differ. They can be seen in the order book when a small “offer” has many “prints”, the total volume of which exceeds the “offer” by several times.
Buy-
hunt /
Sell-
hunt
Trading algorithms, an alternative to iceberg orders. The buy-hunt algorithm buys the entire supply at a certain price and below it. Similarly, sell-hunt sells at all available bids above a certain price. These algorithms are written by the bidders themselves. In this way, a position can be gained or the desired level maintained.
Repeating "prints"
Particularly large players, when they cannot make a transaction on the over-the-counter market, have to resort to various tricks in order to gain a position in the order book without being detected. One of these tricks is to launch an algorithm that buys/sells a certain number of lots on the market at certain intervals. These can be the same volumes at regular intervals, or alternating (for example, 15, 16 and 17 in turn) at random intervals (for example, within 5-15 seconds).
Flipping
Another algorithm for gaining a position could be placing limit orders on one side of the market, so that this side of the market looks strong while a position is being gained on the other side of the market. This can be implemented, for example, with a large ask on top and an iceberg bid on the bottom. When the iceberg is executed, the large “ask” on top is removed and a large “bid” is placed below. Those who initially took a short position begin to buy back their trades, pushing the price up.
Conclusion
The glass and tape are essential tools for day trading and swing trading. For medium- and long-term trading, they are not so effective, but understanding what is happening in the order book will help you better assess the situation on the market and choose entry points with a better risk/reward ratio. There can be a huge number of options for the development of events in a glass. By observing and remembering existing patterns, you can master the skill of using these tools at a level sufficient to qualitatively improve the efficiency of your trading. You can start by observing the examples outlined in this article.
BKS Express
Ribbon prints— the best tool for a trader after the chart. Not indicators, not oscillators, not news and quarterly reports, not tips from the Internet - Time&Sale print ribbon, a trader's best friend and advisor. She rarely lies. When the institutional ones actually gain a position and this is visible on the tape and there is confirmation on the chart in the form clear and clear signal, then, as a rule, the stock in most cases goes in our direction and does not hit our stop.
But most of the time the tape is N I C H E G O! Doesn't print anything interesting. There are several reasons:
- Just noise and order execution on quiet days.
- Insignificant places on the chart, that is, there was not a large traded volume during previous movements.
- Institutionalists are not “fools”; they have no desire to show off their orders, so they confuse their “traces”
- There are quiet days due to the lack of market news.
- know bullish or short signals as you approach your entry point.
- see a set of positions by large buyers or sellers during the formation of a graphical signal at 5m.
- have confirmation upon entry that the “diverse” public and institutions support this movement.
And this is an excerpt from part of a video lesson from a print ribbon lesson with my comments. Below is the download link.
And one of them, execution of transactions of large traders within the spread, and it is desirable that they take place in blocks, in the DAS terminal, they are visible in white. If we take a long position, then we must see reluctance hit the “big ones” at bid. That is, they do not want the limit buyer to be parsed at the bids. If they are short, then on the contrary, they do not want to parse the limit seller on the offer. If at the same time, we see in the glass bid update, if long, and updating offers if short, then this is good.
Here you can download graphs of other examples. And a video on the prints feed and parts about the lesson.
When we say something out loud, it is put aside for us. If we write something down with our own hands, it is embedded in us. When we work through and apply the knowledge of reading the Time&Sale print tape and get the result, this cannot be taken away from us. We understand that this works and will use it in the stock market. And when this is transferred to , it brings confidence in correct and successful online trading.
Sincerely, DimDimych, patience and good luck to you.
Patience is when an open can of your favorite condensed milk is on the table for several days, and you don’t have the right to take it until you deserve it. Trifle? I don't think. This is how T T D is brought up. Labor, Patience and Discipline.
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Trying to improve the efficiency of their trading, traders experiment with dozens of indicators, but neglect such an important and free tool as the tape. The Time and Sales window displays real-time order flow data - price, execution time and size of each trade executed on a trading instrument. Depending on the trading platform, the feed may contain other data - order type, execution route, etc.
For a day trader, the tape shows how a stock is trading at a specific point in time, in a certain market situation, or near significant price levels. Using the tape is especially useful when trading breakouts and when working in the first hour after the market opens, when there are no established levels of the current trading session.
Tape reading is a special skill that can only be developed through practice. The trader needs to constantly watch the tape until he develops a “sixth sense” that allows him to instantly understand what is happening in the stock at the current moment.
How to use the Time and Sales window
The peculiarity of trading on the stock market is that there are only two objective parameters - price and volume. And both of them are reflected in the feed. Correct interpretation of this information significantly increases the chances of success. The main principle that should be followed is to monitor the flow of money and follow it.This activity requires patience. You cannot buy or sell a stock just because order flow has accelerated. You must first identify support and resistance levels, make sure they are relevant, and compare the Time and Sales window data with the chart formation. If a support or resistance level is being actively tested, it is best to wait for it to be broken, as this can often just be a trap that lures inexperienced traders into before moving the stock in the opposite direction.
Each stock has its own behavior and requires a special approach when trading. Therefore, before entering a trade, it is recommended to watch the tape for a while to understand what is happening.
What to look for
Order size
It speaks of the confidence of buyers and sellers. In order to confidently enter a position, it is desirable that there are transactions of 300-400 shares in the feed, but there is no single criterion here, since the liquidity in different shares differs significantly.Order processing speed
This is another important piece of information that can be obtained by reading the tape. Typically, when a significant level of support and resistance is broken, not only the size of executed orders increases, but also the frequency of their execution. This indicates increased interest in this stock at a specific level.Nature of orders
Execution at the bid or ask price is important. If a stock is a buy candidate, the majority of trades in the feed should occur at the ask price. For sale it’s the other way around.For which stocks does the tape work best?
A day trader needs volatile stocks where he can enter into a trade with an acceptable risk-to-reward ratio, counting on fast and strong price movement. Therefore you need to look for high speed tape stocks. It is important to differentiate between high trading volume and very high trading volume. It is best for a day trader not to trade stocks that have an average daily volume of 10 million or more. A novice trader will not be able to read such a tape.Conclusion
The ability to read tape will help a day trader reduce the number of bad trades, since it will allow him to more accurately choose the moment of entry and exit. You can master the skill of reading tape only through constant practice.Analyzing graphs is a useful activity. But studying only one chart may not give you a positive result; it may not only be ineffective, but may even lead to losses. In order to successfully enter and exit a position, you need to pay attention to the instantaneous buying and selling activity at a particular price level. Bursts of buyer and seller activity indicate internal pressure in the instrument, and may be a sign of an impending rapid rise or
no less sharp decline.
We are talking about reading the print feed - that is, a rather curious and obscure concept with which there is a lot of misunderstanding. Despite the slight aura of mystery that envelops this “skill,” traders who have mastered it cannot help but notice that it is this skill that causes the quality of their trading to improve. The reason is extremely simple: the tape never lies.
Time&Sales or “tape of prints”, as domestic traders call it, is one of the main tools of an intraday trader and, perhaps, the most important one for a scalper. The feed displays all transactions carried out by Bid or Ask.
So what information can be emphasized from a feed of prints? First of all, this is information at what price transactions are made. If at the Ask price, then, in the simplest case, buyers are more active and aggressive, since they agree to the sellers’ price. If at the Bid price, then everything is the other way around. In the print feed, we can see at what price the largest volume of transactions is made, see the levels from which the price bounces, and where the spread is compressed. These could be both global support levels and
resistance and micro levels. In combination with the order book from JigsowTrading, we can see hidden orders for buying and selling, see what volume of transactions is taking place on the tape.. The most basic information about reading the tape is collected here.
When reading the tape, you must first look at the flow of orders, in which direction they are moving more actively, and what their size is. Let's take, for example, a situation where there is a slight trend and the price rises. At a certain level we will see a large number of transactions at the Ask price, but the transactions are not able to change the price even by a tick, hence we conclude that at this level there is a hidden seller who holds the offer. Once his entire sell order is satisfied, the price will move further. It is the tape of prints that allows us to find levels of support and resistance, determine their strength and significance.
The second thing you should pay attention to is which side deals with large volumes. It's no secret that large institutional investors trade in large volumes. In order to track such transactions, the platform provides a filter for transactions by volume (large prints). As a rule, a large number of large transactions taking place at the Bid price indicates that a decline is not far off, even if the current uptrend seems reliable.
Typical situations when reading a tape.
- Holding a bid/offer - a large volume passes at the bid price or at the ask price, but the price does not change. With this we see local levels of support and resistance. Based on this signal, you can open positions.
- Progressive bid/offer - when the price increases, the Bid actively rises following the increase in Ask. This signal confirms the trend.
- Bid/offer capture - after some down/up movement, there is a sharp surge in movement on increased volume with reverse absorption of the bid/offer. This is the signal for the end of movement.
How to improve your tape reading skill?
Focus only on the price of the last trade and the current quote.
Good tape reading is based on one simple observation: professionals move the market in the direction that gives them the maximum profit. The main order flow manipulates the price against the emotions of the crowd. Insiders are pushing the price towards support and resistance levels to test the crowd's reaction, hit stops and see what else can be squeezed out of the "small asset holders".
Brief bursts of activity on the tape show the greed and fear of market participants. They indicate the moments when traders enter or leave the market - some with a profit, some with a loss. Watch for nervous prints above offers when prices are rising and for desperate prints below bids when prices are falling. Bonds and other liquid instruments move in corridors set by computer systems of market makers. Ignore fluctuations within these zones, but focus entirely on the tape when price approaches the upper or lower boundary of such a corridor.
And one more observation that will help you improve your tape reading skills. Please note that just above resistance and below support, the price movement often goes through three clearly distinguishable phases:
- a jerk caused by a level breakdown
- rollback to level
- reaction confirming a breakdown or indicating its failure
Most traders focus on sharp moves after a breakout, jumping into the market as soon as they see buyer or seller activity on the tape. Unfortunately, this is just a neat way to lose money. True tape readers at such times wait, watch the development of the three phases described above, and deduce what is really happening - whether this is really a breakthrough in which money can be made, or a mere trap to collect the crowd's stops.
Unfortunately, tape reading cannot be learned by attending a couple of seminars or watching two or three videos. Be prepared to spend a long time watching ribbon prints and price reactions. Why do you think there are practically no good books or articles about reading tape? Yes, simply because years of peering into quotes simply cannot be conveyed in a few simple expressions in printed form.
When people ask me how to learn to read tape, I usually suggest sitting down at a trading terminal and just looking at the tape for several years. Almost everyone takes this as a joke, but in reality it is true. It will take you years to see behind the movement of the numbers on the tape of the plays of different Wall Street players, and you must be prepared for this if you want to trade profitably.
Fortunately, my practice can allow you to shorten this process - just listen to the patterns that I
already noticed, and try to see them yourself.