WHAT IS Fighting The Tape
Fighting the tape is the action of placing a trade or trades that go against the current trend of the market. The phrase comes from the time in history when stock prices were printed on tape, called “ticker tape” because the constant stream of prices was called a ticker. The constant stream of prices on the ticker tape showed whether prices were going up, called rallying, or falling. Going against the tape is acting in a way that’s contrary to what is usually done when the market is moving in a specific direction, and fighting the tape is aggressively acting in the opposite way the tape is moving.
BREAKING DOWN Fighting The Tape
Fighting the tape means trading opposite of the established position for a given market. Someone who is buying stocks while the overall market is falling is said to be fighting the tape, as is someone who is selling stocks while the overall market is rallying. Other examples of fighting the tape are shorting stocks while the market is rallying, or going long while the market is falling.
Fighting the tape is seen by the majority of traders as a bad idea that violates common sense. In volatile markets, however, choosing to fight the tape can lead to profitable trades, since such markets can make directional changes very quickly and abruptly. Conversely, traders can also lose their shirts if the market continues to move against them for a prolonged period.
Fighting the tape is viewed as a contrarian stance by a trader, as traders who choose to trade against the tape are taking positions which oppose the general market perception. There are varied reasons a trader would take a contrarian stance, ranging from aggression and ego to strong feelings that the market is about to reverse.
Ethics of Fighting the Tape
There is no ethical dilemma for individual investors who fight the tape, since it is their own money they are risking by moving contrary to the market. For traders risking other entities’ money, however, fighting the tape can be an ethical issue. A trader who fights the tape because of a suspicion that the market will reverse suddenly and having gone contrary to the current direction of the market will position the trader to capture this reverse is acting in good faith. However, a trader who fights the tape just to take a contrarian position is risking others’ money just to take an ideological position, and this is arguably an unethical position.