Tape Reading
Candlefocus EditorThe use of tape reading began in 1867. Before technology, stock prices and trading information was sent by telegraph using a ticker tape. The tape was printed with a stock’s ticker symbol, price, and volume. This information was sent around the world to the different exchanges, so traders knew the price of a given stock.
The tape reader would analyze this information in order to measure the liquidity and price of the stock. By understanding the flow of the market, traders were able to make decisions based on the stock’s/sector’s performance in the current market. They also studied the patterns and trends, in order to identify any potential trading opportunities.
The tape reader would also use volume, price differences between exchanges and the momentum of a stock in order to make conclusions or to identify a particular stock that may be ready to rise or fall. Each tape reader had their own individual approach.
Tape reading was a popular technique amongst day traders, until technology changed and it became outdated. As the method was phased out in the 1960s, the terms and strategies that came from reading the tape are still regularly used today.
For electronic traders, there are various platforms with access to real-time market data. This allows investors to have more options and information when making decisions on their investments. With access to global exchanges, thousands of stocks, and technical analysis tools, investors can analyse market conditions and availability in greater depth.
Overall, while tape reading is no longer used, its influence is still visible in today’s stock markets. The techniques used during the technique’s hayday still inform the decisions day traders make. The meaning and purpose of tape reading has become even more relevant in this modern age of electronic trading platforms.