Tape Reading

DEFINITION of 'Tape Reading'

An old investing technique used by day traders to analyze the price and volume of a particular stock in order to execute profitable trades. Tape reading involves evaluating the size of stock orders, order speed, order price, and order condition (at ask, at bid, between ask and bid) to identify trends in trading behavior by insiders, professionals and the general public. These trends help a trader recognize good times to buy or sell.

BREAKING DOWN 'Tape Reading'

The term gets its name from the old method of displaying trade, bid and ask information on paper printed by ticker tape machines (today, it is displayed electronically). Investors read the tape numbers to create an unemotional analysis and capitalize on the behavior of the market. This technique can be profitable whether the market is bullish or bearish.

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RELATED FAQS
  1. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  2. What is the difference between a quote driven market and an order driven one?

    The difference between these two market systems lies in what is displayed in the market in terms of orders and bid and ask ... Read Answer >>
  3. What is the difference between a stop and a market order?

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  4. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
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