What Is Tape Reading?
Let me explain tape reading to you directly: it's an old-school method that day traders relied on to break down the price and volume of stocks. From about the 1860s up to the 1960s, this data came through telegraph lines on ticker tape, showing the ticker symbol, price, and volume. Those systems got phased out in the 1960s as personal computers and electronic communication networks (ECNs) came into play.
Key Takeaways
Here's what you need to know: tape reading was how day traders analyzed stock price and volume before tech replaced it. The data included a stock's ticker symbol, price, and volume, all sent via ticker tape over telegraph lines. Even though it faded out in the 1960s, traders today use similar approaches electronically, and terms from that era are still common.
Understanding Tape Reading
Ticker tapes started with Edward A. Calahan's invention in 1867 for the Gold and Stock Telegraph Company. Thomas Edison improved it in 1871 with the first practical stock ticker, making markets more efficient. These machines quickly became standard in major brokerages for sharing price and volume info.
I can tell you that traders like Jesse Livermore built their reputations through tape reading; he essentially started momentum trading. Books like Tape Reading and Market Tactics and Reminiscences of a Stock Operator covered it in depth. Terms from back then stick around, like ticker symbol, stock ticker, and advice such as 'don’t fight the tape,' which means don't go against the trend.
By the 1960s and 1970s, tape reading became obsolete with TVs and computers rising, but those terms like ticker symbol and stock ticker are still in use, and traders apply similar techniques with today's tech.
Fast Fact
Even as personal computers made traditional tape reading outdated, the lingo from that period lives on in trading today—think 'ticker symbol,' 'stock ticker,' and 'don't fight the tape.'
Modern Tape Reading
Today, what we call tape reading means checking electronic order books to predict where a stock's price might go. Unlike old tickers, these books show non-executed trades, giving you more market detail at any moment.
For instance, if you spot large limit sell orders at a specific price across exchanges in a security’s order book, that signals potential resistance there. On the flip side, big limit buy orders below the current price suggest strong support, which might give you the go-ahead to buy, knowing there's a floor.
Many brokers offer this via Level II quotes. For advanced users, programmatic traders pull this data into algorithms. Take Interactive Brokers—they have a 'reqMktDepth' function for streaming order book data. These details are crucial when you're building trading algorithms.
Other articles for you
Common law is a legal system based on judicial precedents rather than statutes, influencing decisions in various countries including the US.
Greenwashing is a deceptive practice where companies falsely claim environmental benefits to mislead consumers and investors.
The Reserve Bank of India is the central bank responsible for monetary policy, financial regulation, and currency management in India.
Underlying mortality assumptions are projections of death rates used by actuaries to calculate insurance and pension costs based on statistical tables.
A Bank Confirmation Letter (BCL) is a bank's formal assurance of a borrower's access to funds for a specific transaction without guaranteeing payment.
This text explains what stock price targets are, how analysts calculate them, and their role in investment decisions.
The Industrial Production Index (IPI) is a monthly indicator tracking output in key industrial sectors relative to a base year.
Unfavorable variance occurs when actual costs exceed standard or projected costs, signaling potential profit shortfalls that require management attention.
Flow of funds accounts track the net inflows and outflows of money across various sectors of a national economy for analysis by central banks.
A nonrefundable tax credit reduces your tax liability to zero but doesn't provide a refund for any excess amount.